Subrogation is a concept that's understood among legal and insurance firms but often not by the policyholders they represent. Even if it sounds complicated, it would be to your advantage to comprehend the steps of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance company.
Every insurance policy you have is a promise that, if something bad occurs, the firm that covers the policy will make good in one way or another in a timely fashion. If a windstorm damages your property, for instance, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is sometimes a heavily involved affair – and time spent waiting sometimes compounds the damage to the victim – insurance companies usually decide to pay up front and assign blame afterward. They then need a way to recover the costs if, in the end, they weren't in charge of the payout.
Let's Look at an Example
You arrive at the Instacare with a gouged finger. You give the nurse your medical insurance card and she records your policy information. You get stitches and your insurer is billed for the services. But on the following afternoon, when you clock in at your place of employment – where the accident happened – your boss hands you workers compensation paperwork to file. Your employer's workers comp policy is actually responsible for the bill, not your medical insurance company. The latter has a right to recover its money in some way.
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. Some companies 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 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.
How Does This Affect the Insured?
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 – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to get back its expenses by raising your premiums. On the other hand, if it has a knowledgeable legal team and goes after those cases efficiently, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, depending on your state laws.
Furthermore, if the total cost 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 civil law 95037, pursue subrogation and wins, it will recover your losses in addition to its own.
All insurers are not created equal. When shopping around, it's worth measuring the reputations of competing companies to evaluate if they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers posted as the case proceeds; 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, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.