Subrogation and How It Affects You

Subrogation is a term that's well-known in legal and insurance circles but often not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to know the steps of how it works. The more information you have about it, the more likely it is that relevant proceedings will work out in your favor.

Any insurance policy you hold is a commitment that, if something bad occurs, the business on the other end of the policy will make good in one way or another in a timely fashion. If your vehicle is hit, insurance adjusters (and police, 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 typically a heavily involved affair – and delay in some cases adds to the damage to the victim – insurance companies often opt to pay up front and figure out the blame after the fact. They then need a way to regain the costs if, when all the facts are laid out, they weren't responsible for the payout.

For Example

You are in a car accident. Another car ran 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 policy should have paid for the repair of your car. How does your company get its money back?

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. Ordinarily, only you can sue for damages to your self or property. But under subrogation law, your insurer is extended some of your rights in exchange for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.

How Does This Affect Individuals?

For one thing, if you have a deductible, your insurer 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 – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recover its expenses by boosting 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 $1,000 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 the laws in your state.

Furthermore, if the total cost 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 car accident lawyer Tacoma WA, pursue subrogation and wins, it will recover your expenses in addition to its own.

All insurance agencies are not the same. When comparing, it's worth contrasting the reputations of competing companies to determine whether they pursue winnable subrogation claims; if they resolve those claims without delay; if they keep their customers updated as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurance company has a record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, you should keep looking.