Subrogation is a term that's well-known among legal and insurance firms but rarely by the policyholders who employ them. Even if you've never heard the word before, it is in your self-interest to comprehend an overview of the process. The more information you have about it, the better decisions you can make about your insurance company.
Every insurance policy you own is a commitment that, if something bad occurs, the insurer of the policy will make restitutions in a timely fashion. If a windstorm damages your real estate, for example, your property insurance agrees to pay you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is sometimes a confusing affair – and delay often adds to the damage to the victim – insurance companies often decide to pay up front and assign blame after the fact. They then need a method to regain the costs if, ultimately, they weren't actually in charge of the expense.
You are in a highway accident. Another car ran into yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was entirely at fault and his insurance policy should have paid for the repair of your vehicle. How does your 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. Under ordinary circumstances, only you can sue for damages to your person 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 Should I Care?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer who 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 lax about bringing subrogation cases to court, it might opt to get back its losses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all 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 responsible), you'll typically get half your deductible back, depending on your state laws.
Additionally, if the total price 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 workers compensation insurance quote Manassas, VA, pursue subrogation and succeeds, it will recover your expenses in addition to its own.
All insurance companies are not created equal. When comparing, it's worth looking at the records of competing companies to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their customers advised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.