Subrogation and How It Affects You

Subrogation is a term that's well-known in legal and insurance circles but often not by the people they represent. Even if you've never heard the word before, it would be to your advantage to know the nuances of how it works. The more you know about it, the more likely it is that relevant proceedings will work out in your favor.

Every insurance policy you have is a promise that, if something bad happens to you, the insurer of the policy will make restitutions 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 person's insurance pays out.

But since ascertaining who is financially accountable for services or repairs is often a heavily involved affair – and delay often adds to the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame after the fact. They then need a way to regain the costs if, ultimately, they weren't in charge of the expense.

For Example

You are in a highway 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 and file a repair claim. Later police tell the insurance companies that the other driver was entirely at fault and his insurance policy should have paid for the repair of your car. How does your insurance company get its funds back?

How Does Subrogation Work?

This is where subrogation comes in. It is the way that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some insurance firms 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 self or property. But under subrogation law, your insurer is extended 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.

How Does This Affect Policyholders?

For a start, if you have a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup 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 enthusiastically, 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 accountable), you'll typically get half your deductible back, based on the laws in most states.

Furthermore, if the total expense 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 Auto Accident Lawyer in Marietta, Ga, pursue subrogation and wins, it will recover your costs as well as its own.

All insurers are not created equal. When shopping around, it's worth looking at the reputations of competing companies to evaluate if they pursue winnable subrogation claims; if they do so in a reasonable amount of time; if they keep their clients informed as the case continues; 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 insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.