Subrogation is a concept that's understood among insurance and legal professionals but often not by the customers who hire them. Even if you've never heard the word before, it would be to your advantage to know the nuances of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
Every insurance policy you own is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions in one way or another in a timely manner. If you get injured at work, your company's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially accountable for services or repairs is typically a heavily involved affair – and delay sometimes increases the damage to the victim – insurance companies usually opt to pay up front and figure out the blame afterward. They then need a mechanism to recover the costs if, ultimately, they weren't in charge of the payout.
You are in an auto accident. Another car ran into yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was at fault and his insurance should have paid for the repair of your vehicle. How does your insurance company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurance company is extended some of your rights in exchange for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.
How Does This Affect the Insured?
For a start, if your insurance policy stipulated a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by upping your premiums. On the other hand, if it has a proficient legal team and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get half your deductible back, based on the laws in most states.
Additionally, if the total price of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as workers comp insurance Purcellville, VA, successfully press a subrogation case, it will recover your costs as well as its own.
All insurers are not the same. When comparing, it's worth comparing the records of competing firms to find out if they pursue legitimate subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders apprised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance firm has a reputation of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.