Subrogation and How It Affects Policyholders

Subrogation is a term that's understood in insurance and legal circles but rarely by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand the steps of how it works. The more information you have, the better decisions you can make with regard to your insurance company.

Every insurance policy you own is an assurance that, if something bad happens to you, the business that insures the policy will make good in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was at fault and that person's insurance covers the damages.

But since figuring out who is financially responsible for services or repairs is often a heavily involved affair – and time spent waiting in some cases compounds the damage to the victim – insurance firms usually opt to pay up front and figure out the blame later. They then need a path to recover the costs if, when all the facts are laid out, they weren't actually responsible for the payout.

Can You Give an Example?

You are in an auto accident. Another car collided with yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was at fault and her insurance should have paid for the repair of your vehicle. How does your insurance company get its funds back?

How Does Subrogation Work?

This is where subrogation comes in. It is the process 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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange for making good on 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 one thing, 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 have a stake in the outcome as well – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is acting both in its own interests and in yours. 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 culpable), you'll typically get half your deductible 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 lawyer salem ut, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurers are not the same. When comparing, it's worth looking up the reputations of competing agencies to determine if they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their customers apprised as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.