Subrogation is an idea that's well-known in insurance and legal circles 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 in your self-interest to know the steps of how it works. The more information you have, the better decisions you can make with regard to your insurance company.
An insurance policy you own is an assurance that, if something bad occurs, the firm on the other end of the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that person's insurance pays out.
But since figuring out who is financially accountable for services or repairs is often a heavily involved affair – and delay often adds to the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame later. They then need a means to recoup the costs if, ultimately, they weren't in charge of the expense.
Let's Look at an Example
You rush into the emergency room with a sliced-open finger. You give the nurse your health insurance card and he takes down your plan information. You get stitches and your insurer gets a bill for the services. But on the following afternoon, when you clock in at your place of employment – where the injury happened – your boss hands you workers compensation forms to fill out. Your employer's workers comp policy is in fact responsible for the payout, not your health insurance policy. The latter has a right to recover its money somehow.
How Subrogation Works
This is where subrogation comes in. It is the method 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. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer is given some of your rights in exchange for making good on 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 a start, 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 – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its losses by increasing your premiums. On the other hand, if it has a competent legal team and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all ten grand 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.
Additionally, if the total expense 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 Catastrophic injury attorneys Perry Hall MD, pursue subrogation and succeeds, it will recover your costs in addition to its own.
All insurers are not created equal. When shopping around, it's worth looking at the reputations of competing companies to determine if they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their clients informed as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.