Subrogation is a term that's well-known among legal and insurance professionals but rarely by the policyholders they represent. Even if it sounds complicated, it is in your self-interest to understand the steps of how it works. The more information you have about it, the better decisions you can make with regard to your insurance policy.
An insurance policy you have is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions in one way or another in a timely manner. If a storm damages your property, for example, your property insurance steps in to remunerate you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is usually a time-consuming affair – and time spent waiting sometimes compounds the damage to the victim – insurance companies usually opt to pay up front and assign blame after the fact. They then need a means to get back the costs if, in the end, they weren't responsible for the payout.
You go to the emergency room with a gouged finger. You give the nurse your health insurance card and she records your coverage details. You get taken care of and your insurance company gets a bill for the medical care. But on the following afternoon, when you get to your workplace – where the injury occurred – your boss hands you workers compensation forms to fill out. Your employer's workers comp policy is in fact responsible for the bill, not your health insurance. It has a vested interest in getting that money back somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For one thing, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that 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 insurer is timid on any subrogation case it might not win, it might choose to get back its costs by boosting your premiums. On the other hand, if it has a competent legal team and goes after them efficiently, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as family law 79101, pursue subrogation and wins, it will recover your losses in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth scrutinizing the records of competing firms to evaluate whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their clients posted as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurance agency has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.