Subrogation is an idea that's understood in legal and insurance circles but often 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 you know about it, the more likely relevant proceedings will work out favorably.
Any insurance policy you own is a commitment that, if something bad happens to you, the business on the other end of the policy will make restitutions without unreasonable delay. If your property is robbed, for instance, your property insurance agrees to remunerate you or enable the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is typically a time-consuming affair – and delay sometimes increases the damage to the policyholder – insurance firms usually opt to pay up front and assign blame later. They then need a mechanism to get back the costs if, ultimately, they weren't in charge of the expense.
Let's Look at an Example
You are in a traffic-light accident. Another car ran into yours. Police are called, you exchange insurance details, 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 at fault and her insurance policy should have paid for the repair of your car. How does your insurance company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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 done to your person or property. But under subrogation law, your insurance company is considered to have some of your rights 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 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 get back its expenses by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is doing you a favor as well as itself. If all of the money 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 culpable), you'll typically get half your deductible back, depending on the laws in your state.
Furthermore, 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 workmans comp lawyer Duluth, pursue subrogation and wins, it will recover your losses as well as its own.
All insurance agencies are not created equal. When comparing, it's worth looking up the reputations of competing agencies to evaluate whether they pursue valid subrogation claims; if they do so fast; if they keep their accountholders informed as the case goes on; and if they then process successfully won reimbursements quickly 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 paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, you should keep looking.