Subrogation is an idea that's understood among legal and insurance companies but rarely by the policyholders 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 understand the nuances of the process. The more you know, the more likely relevant proceedings will work out in your favor.
Every insurance policy you have is a promise that, if something bad happens to you, the company on the other end of the policy will make good without unreasonable delay. If you get injured at work, for example, your company'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 accountable for services or repairs is typically a tedious, lengthy affair – and time spent waiting sometimes compounds the damage to the victim – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a way to regain the costs if, when all is said and done, they weren't responsible for the expense.
For Example
You go to the doctor's office with a gouged finger. You give the nurse your medical insurance card and he takes down your policy details. You get stitched up and your insurance company is billed for the tab. But the next morning, when you get to your workplace – where the injury occurred – your boss hands you workers compensation forms to fill out. Your company's workers comp policy is actually responsible for the expenses, not your medical insurance. The latter has a right to recover its costs in some way.
How Subrogation Works
This is where subrogation comes in. It is the way that an insurance company uses to claim payment 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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurance company is extended some of your rights for making good on the damages. It can go after the money that was originally due to you, because it has covered the amount already.
Why Should I Care?
For a start, if you have a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its losses by boosting your premiums and call it a day. 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 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as real estate law Williams Bay, WI, pursue subrogation and wins, it will recover your losses in addition to its own.
All insurers are not created equal. When comparing, it's worth looking up the reputations of competing companies to find out whether they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their policyholders informed as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurance company has a reputation 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.