Subrogation is an idea that's well-known in insurance and legal circles but rarely by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to comprehend the nuances of the process. The more information you have about it, the more likely relevant proceedings will work out favorably.
Every insurance policy you hold is a commitment that, if something bad happens to you, the firm that insures the policy will make good in a timely manner. If you get injured at work, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance companies usually opt to pay up front and assign blame after the fact. They then need a way to regain the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
Let's Look at an Example
You arrive at the doctor's office with a sliced-open finger. You hand the receptionist your medical insurance card and she writes down your plan information. You get stitched up and your insurer gets a bill for the services. But the next morning, when you clock in at your workplace – where the accident occurred – you are given workers compensation forms to fill out. Your workers comp policy is in fact responsible for the payout, not your medical insurance company. The latter has an interest in recovering its costs somehow.
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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 insurer is given 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.
Why Does This Matter to Me?
For a start, if you have a deductible, it wasn't just your insurer 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 recover its costs by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after them efficiently, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total loss of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as Criminal Defense Springville UT, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth examining the reputations of competing companies to find out whether they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their accountholders advised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, instead, an insurance company has a record of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, even attractive rates won't outweigh the eventual headache.