Subrogation is a concept that's understood among insurance and legal professionals but often not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand an overview of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
Every insurance policy you hold is a commitment that, if something bad occurs, the business on the other end of the policy will make restitutions in one way or another in a timely manner. If you get injured on the job, your company's workers compensation agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially accountable for services or repairs is typically a heavily involved affair – and delay often compounds the damage to the victim – insurance companies usually decide to pay up front and assign blame afterward. They then need a mechanism to recover the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
Let's Look at an Example
You head to the emergency room with a gouged finger. You give the nurse your health insurance card and he records your policy details. You get taken care of and your insurer is billed for the tab. But on the following afternoon, when you arrive at your workplace – where the accident occurred – you are given workers compensation paperwork to fill out. Your employer's workers comp policy is in fact responsible for the bill, not your health insurance company. It has a vested interest in getting that money back in some way.
How Subrogation Works
This is where subrogation comes in. It is the way 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 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 that was originally due to you, because it has covered the amount already.
How Does This Affect Individuals?
For a start, if you have a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recoup its costs by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues 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 $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as criminal lawyer Portland, OR, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurance companies are not the same. When shopping around, it's worth comparing the records of competing firms to evaluate if they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their accountholders informed as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance company 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.