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 would be in your self-interest to know an overview of how it works. The more information you have about it, the better decisions you can make with regard to your insurance policy.
Any insurance policy you own is a promise that, if something bad occurs, the company on the other end of the policy will make restitutions in a timely manner. If you get injured at work, for example, your employer's workers compensation agrees to pay 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 often a time-consuming affair – and delay sometimes adds to the damage to the victim – insurance firms usually decide to pay up front and figure out the blame afterward. They then need a way to recoup the costs if, in the end, they weren't actually responsible for the expense.
Let's Look at an Example
You go to the emergency room with a sliced-open finger. You hand the nurse your health insurance card and he records your policy details. You get taken care of and your insurer gets an invoice for the expenses. But on the following day, when you get to work – where the injury happened – your boss hands you workers compensation paperwork to file. Your workers comp policy is in fact responsible for the hospital visit, not your health 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 method 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. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurer is given 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.
How Does This Affect the Insured?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recover its costs by raising 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 $10,000 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 responsible), you'll typically get half your deductible back, depending on your state laws.
Moreover, if the total loss 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 Mableton GA, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not the same. When shopping around, it's worth looking up the reputations of competing agencies to evaluate if they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their clients advised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, you should keep looking.