Subrogation is a term that's understood in legal and insurance circles but sometimes not 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 know the steps of how it works. The more knowledgeable you are about it, the more likely relevant proceedings will work out favorably.
Any insurance policy you own is a promise that, if something bad occurs, the firm that covers the policy will make good in a timely fashion. If your house suffers fire damage, for example, your property insurance steps in to compensate you or pay for the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is usually a heavily involved affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance companies often decide to pay up front and assign blame after the fact. They then need a path to recover the costs if, once the situation is fully assessed, they weren't responsible for the payout.
For Example
You are in a highway accident. Another car ran into yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was entirely to blame and her insurance should have paid for the repair of your auto. How does your company get its funds back?
How Subrogation Works
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 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 self or property. But under subrogation law, your insurance company is extended some of your rights in exchange for having taken care of the damages. It can go after the money 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 insurance company that 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 timid on any subrogation case it might not win, it might choose to recoup its losses by raising your premiums and call it a day. 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 deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get half your deductible back, based on the laws in most states.
In addition, 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 Norcross, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth scrutinizing the records of competing companies to find out if they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their accountholders updated as the case proceeds; 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 insurance company has a reputation of paying out claims that aren't its responsibility and then protecting its profit margin by raising your premiums, you should keep looking.