Subrogation is a concept that's understood among legal and insurance firms but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to understand an overview of how it works. The more you know about it, the better decisions you can make about your insurance policy.
Any insurance policy you have is an assurance that, if something bad happens to you, the business that insures the policy will make good in one way or another in a timely fashion. If you get hurt at work, your employer's workers compensation insurance picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially responsible for services or repairs is typically a heavily involved affair – and time spent waiting often adds to the damage to the policyholder – insurance firms often decide to pay up front and assign blame after the fact. They then need a method to regain the costs if, when all the facts are laid out, they weren't responsible for the payout.
Can You Give an Example?
You are in a car accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was at fault and her insurance policy should have paid for the repair of your auto. How does your company get its funds back?
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 companies 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 done to your person or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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 your insurance policy stipulated a deductible, your insurance company wasn't the only one that 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 timid on any subrogation case it might not win, it might opt to recoup its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after them 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 50 percent responsible), you'll typically get $500 back, based on the laws in most states.
In addition, if the total cost 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 Personal injury attorney near me Puyallup WA, pursue subrogation and succeeds, it will recover your expenses as well as its own.
All insurers are not created equal. When shopping around, it's worth contrasting the records of competing companies to determine if they pursue winnable subrogation claims; if they do so fast; if they keep their clients informed 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, on the other hand, an insurance agency has a record of honoring claims that aren't its responsibility and then protecting its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.