Subrogation and How It Affects You

Subrogation is an idea that's well-known among legal and insurance professionals but rarely by the customers they represent. Even if you've never heard the word before, it would be in your self-interest to comprehend an overview of how it works. The more information you have about it, the more likely it is that relevant proceedings will work out favorably.

Any insurance policy you hold is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that party's insurance pays out.

But since ascertaining who is financially accountable for services or repairs is typically a time-consuming affair – and time spent waiting sometimes increases the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame after the fact. They then need a means to recover the costs if, when all is said and done, they weren't responsible for the expense.

Let's Look at an Example

You rush into the emergency room with a deeply cut finger. You hand the receptionist your medical insurance card and she takes down your policy information. You get stitches and your insurance company gets an invoice for the expenses. But on the following morning, when you get to your workplace – where the accident happened – your boss hands you workers compensation paperwork to file. Your company's workers comp policy is actually responsible for the costs, not your medical insurance company. The latter has an interest in recovering its costs somehow.

How Does Subrogation Work?

This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is given some of your rights in exchange for making good on the damages. It can go after the money that was 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 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 recoup its expenses by upping your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is acting both in its own interests and in yours. If all 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 $500 back, depending on your state laws.

Furthermore, if the total expense 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 worker compensation terms Norcross GA, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance companies are not created equal. When shopping around, it's worth researching the reputations of competing firms to evaluate whether they pursue legitimate subrogation claims; if they do so quickly; if they keep their accountholders informed as the case goes on; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, instead, an insurance agency has a reputation of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.