Subrogation is a term that's understood among legal and insurance companies but often not by the people who employ them. Even if it sounds complicated, it would be to your advantage to understand the steps of how it works. The more you know about it, the better decisions you can make with regard to your insurance policy.
An insurance policy you have is a commitment that, if something bad occurs, the business that insures the policy will make good in one way or another in a timely fashion. If you get an injury while working, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and time spent waiting sometimes increases the damage to the victim – insurance companies usually decide to pay up front and figure out the blame afterward. They then need a path to get back the costs if, when there is time to look at all the facts, they weren't responsible for the expense.
Let's Look at an Example
You are in a highway accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was entirely at fault and his insurance should have paid for the repair of your car. How does your company get its money back?
How Does Subrogation Work?
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 insurance company is given some of your rights in exchange 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 Policyholders?
For a start, 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 – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recoup its costs by boosting your premiums. On the other hand, if it has a competent legal team and pursues those cases efficiently, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full thousand-dollar 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, based on the laws in most states.
Furthermore, if the total price of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as civil law 95037, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurance agencies are not the same. When shopping around, it's worth researching the reputations of competing agencies to find out whether they pursue valid subrogation claims; if they do so fast; if they keep their customers apprised as the case goes on; 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 firm has a reputation of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.