What You Need to Know About Subrogation

Subrogation is an idea that's well-known in legal and insurance circles but rarely by the people who employ them. Even if you've never heard the word before, it is to your advantage to know the nuances of how it works. The more you know, the better decisions you can make about your insurance company.

Every 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 one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance covers the damages.

But since ascertaining who is financially accountable for services or repairs is usually a tedious, lengthy affair – and time spent waiting often increases the damage to the policyholder – insurance firms usually opt to pay up front and assign blame later. They then need a mechanism to recover the costs if, when all the facts are laid out, they weren't in charge of the payout.

Can You Give an Example?

You rush into the doctor's office with a sliced-open finger. You hand the nurse your medical insurance card and he records your policy details. You get stitches and your insurance company gets an invoice for the expenses. But on the following day, when you get to your place of employment – where the injury happened – your boss hands you workers compensation forms to file. Your company's workers comp policy is in fact responsible for the payout, not your medical insurance policy. It has a vested interest in getting that money back somehow.

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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 to your self or property. But under subrogation law, your insurance company is given 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 Do I Need to Know This?

For starters, 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 – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to get back 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 aggressively, it is acting both in its own interests and in yours. If all is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get $500 back, depending on your state laws.

In addition, 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 bk personal 66061, successfully press a subrogation case, it will recover your losses as well as its own.

All insurance companies are not created equal. When shopping around, it's worth looking at the records of competing companies to evaluate if they pursue winnable subrogation claims; if they do so with some expediency; if they keep their customers posted as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your losses 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 covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.