The Things You Need to Know About Subrogation

Subrogation is a concept that's well-known in legal and insurance circles but sometimes not by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your benefit to understand the steps of the process. The more information you have, the more likely it is that relevant proceedings will work out favorably.

An insurance policy you own is a promise that, if something bad occurs, the company that insures the policy will make good without unreasonable delay. If your house burns down, your property insurance steps in to compensate you or facilitate the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is often a heavily involved affair – and delay often compounds the damage to the victim – insurance companies usually opt to pay up front and assign blame after the fact. They then need a mechanism to regain the costs if, when all is said and done, they weren't actually responsible for the payout.

For Example

You arrive at the hospital with a deeply cut finger. You hand the receptionist your medical insurance card and he takes down your coverage information. You get taken care of and your insurer is billed for the tab. But on the following afternoon, when you arrive at your workplace – where the accident occurred – your boss hands you workers compensation paperwork to turn in. Your company's workers comp policy is in fact responsible for the expenses, not your medical insurance policy. The latter has an interest in recovering its costs somehow.

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some insurance firms have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurer is considered to have some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Should I Care?

For starters, if you have a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its losses by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get $500 back, based on the laws in most states.

Furthermore, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as Catastrophic injury attorneys Severna Park MD, pursue subrogation and wins, it will recover your expenses as well as its own.

All insurers are not created equal. When shopping around, it's worth comparing the reputations of competing firms to determine whether they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their policyholders informed as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurance agency has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.

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