Subrogation is a concept that's well-known in insurance and legal circles but often not by the customers who employ them. Even if you've never heard the word before, it would be in your self-interest to understand an overview of how it works. The more information you have, the more likely it is that an insurance lawsuit will work out in your favor.
Any insurance policy you have is a commitment that, if something bad happens to you, the business on the other end of the policy will make good in a timely fashion. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) determine who was to blame and that person's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance companies in many cases decide to pay up front and assign blame later. They then need a way to get back the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.
Let's Look at an Example
You arrive at the doctor's office with a deeply cut finger. You hand the receptionist your health insurance card and he takes down your plan information. You get stitches and your insurer gets an invoice for the medical care. But on the following afternoon, when you get to your place of employment – where the injury occurred – your boss hands you workers compensation paperwork to file. Your employer's workers comp policy is actually responsible for the hospital trip, not your health insurance company. It has a vested interest in getting that money back in some way.
How Does Subrogation Work?
This is where subrogation comes in. It is the method 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. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurer 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 Do I Need to Know This?
For a start, 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 the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to recover its losses by boosting your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get $500 back, based on the laws in most states.
Moreover, if the total loss of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as employment law 98501, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth researching the records of competing agencies to determine if they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their clients apprised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurance company has a record of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.