Subrogation is a concept that's well-known among insurance and legal companies but often not by the people they represent. Even if you've never heard the word before, it is in your self-interest to know an overview of the process. The more you know, the more likely it is that an insurance lawsuit will work out in your favor.
Every insurance policy you own is a promise that, if something bad occurs, the business on the other end of the policy will make good in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that person's insurance covers the damages.
But since determining who is financially responsible for services or repairs is sometimes a time-consuming affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance firms often opt to pay up front and assign blame after the fact. They then need a mechanism to recoup the costs if, ultimately, they weren't in charge of the expense.
You rush into the Instacare with a deeply cut finger. You hand the nurse your medical insurance card and she records your coverage details. You get taken care of and your insurance company gets a bill for the tab. But on the following day, when you arrive at your workplace – where the accident occurred – you are given workers compensation paperwork to fill out. Your workers comp policy is in fact responsible for the payout, not your medical insurance. It has a vested interest in getting that money back somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. 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 having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For one thing, 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 the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recoup its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get $500 back, depending on your state laws.
Moreover, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as personal injury law firm Tacoma WA, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not the same. When shopping around, it's worth looking up the records of competing agencies to evaluate if they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their clients updated as the case continues; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.