Subrogation and How It Affects Your Insurance Policy

Subrogation is an idea that's well-known among insurance and legal firms but often not by the people they represent. Rather than leave it to the professionals, it is in your benefit to comprehend the steps of the process. The more information you have about it, the better decisions you can make about your insurance company.

Every insurance policy you have is an assurance that, if something bad happens to you, the business on the other end of the policy will make good in a timely manner. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) decide who was to blame and that party's insurance covers the damages.

But since determining who is financially responsible for services or repairs is usually a time-consuming affair – and time spent waiting often adds to the damage to the victim – insurance firms usually decide to pay up front and figure out the blame after the fact. They then need a mechanism to recover the costs if, once the situation is fully assessed, they weren't actually in charge of the payout.

For Example

You arrive at the emergency room with a gouged finger. You hand the receptionist your medical insurance card and he writes down your coverage details. You get stitched up and your insurer gets an invoice for the expenses. But the next day, when you arrive at your workplace – where the accident occurred – you are given workers compensation forms to turn in. Your company's workers comp policy is actually responsible for the hospital visit, not your medical insurance company. It has a vested interest in getting that money back somehow.

How Subrogation Works

This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. 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. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended 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.

Why Does This Matter to Me?

For one thing, if your insurance policy stipulated 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 timid on any subrogation case it might not win, it might opt to get back its losses by raising your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues those cases efficiently, 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 one-half to blame), you'll typically get half your deductible back, based on the laws in most states.

In addition, 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 costly. If your insurance company or its property damage lawyers, such as workmans comp Duluth, pursue subrogation and wins, it will recover your costs as well as its own.

All insurance agencies are not created equal. When shopping around, it's worth contrasting the reputations of competing companies to evaluate if they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their customers apprised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurance firm has a record of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.