Subrogation is an idea that's understood among legal and insurance companies but sometimes not by the customers who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to know the nuances of how it works. The more you know about it, the better decisions you can make with regard to your insurance policy.
Any insurance policy you have is a promise that, if something bad happens to you, the firm on the other end of the policy will make restitutions in a timely fashion. If a blizzard damages your property, 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 sometimes a confusing affair – and delay in some cases compounds the damage to the policyholder – insurance companies in many cases decide to pay up front and figure out the blame after the fact. They then need a path to regain the costs if, when all the facts are laid out, they weren't responsible for the payout.
You rush into the hospital with a gouged finger. You hand the nurse your medical insurance card and he writes down your policy details. You get stitches and your insurer gets a bill for the expenses. But on the following day, when you arrive at your workplace – where the injury happened – you are given workers compensation forms to turn in. Your workers comp policy is actually responsible for the expenses, not your medical insurance company. It has a vested interest in getting that money back somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. 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 insurer is given 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.
How Does This Affect Individuals?
For one thing, if you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recover its losses by upping your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is acting both in its own interests and in yours. If all ten grand 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 price 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 estate planning attorney Racine WI, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance companies are not the same. When shopping around, it's worth comparing the reputations of competing agencies to find out whether they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their accountholders posted as the case continues; 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 agency has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.