Subrogation and How It Affects Policyholders

Subrogation is an idea that's well-known among legal and insurance firms but sometimes not by the customers they represent. Even if it sounds complicated, it would be to your advantage to know an overview 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 have is an assurance that, if something bad occurs, the insurer of the policy will make good without unreasonable delay. If your house burns down, your property insurance steps in to repay you or enable the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is usually a time-consuming affair – and time spent waiting sometimes increases the damage to the victim – insurance firms in many cases opt to pay up front and assign blame after the fact. They then need a method to recover the costs if, when all the facts are laid out, they weren't actually in charge of the expense.

For Example

You are in a vehicle accident. Another car crashed into yours. The police show up to assess the situation, 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 should have paid for the repair of your vehicle. How does your company get its funds back?

How Subrogation Works

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. Ordinarily, only you can sue for damages done to your self 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.

How Does This Affect Me?

For one thing, 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 – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recover its losses by ballooning your premiums. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, 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 at fault), you'll typically get half your deductible back, depending on the laws in your state.

Additionally, 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 lawyer kemmerer wy, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurers are not created equal. When shopping around, it's worth weighing the reputations 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 apprised 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, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.