Subrogation is a concept that's understood among insurance and legal firms but often not by the policyholders who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to understand an overview of the process. The more information you have, the more likely relevant proceedings will work out favorably.
Any insurance policy you own is a promise that, if something bad happens to you, the firm that insures the policy will make good in a timely manner. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance pays out.
But since figuring out who is financially accountable for services or repairs is usually a confusing affair – and time spent waiting often adds to the damage to the policyholder – insurance companies often opt to pay up front and figure out the blame afterward. They then need a means to regain the costs if, when all is said and done, they weren't responsible for the payout.
Let's Look at an Example
You arrive at the doctor's office with a gouged finger. You hand the receptionist your health insurance card and he writes down your coverage details. You get stitched up and your insurance company gets an invoice for the tab. But the next afternoon, when you clock in at your workplace – where the injury happened – you are given workers compensation paperwork to file. Your employer's workers comp policy is actually responsible for the bill, not your health insurance. The latter has a right to recover its money in some way.
How Does Subrogation Work?
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is given some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For a start, if you have a deductible, it wasn't just your insurance company that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by ballooning your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after those cases aggressively, it is doing you a favor as well as itself. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get $500 back, based on the laws in most states.
In addition, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as Car Accident Attorney Sumner, pursue subrogation and wins, it will recover your costs as well as its own.
All insurers are not created equal. When comparing, it's worth comparing the records of competing agencies to determine whether they pursue winnable subrogation claims; if they resolve those claims without delay; if they keep their customers advised as the case continues; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, instead, 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 should keep looking.