Subrogation is a term that's well-known in insurance and legal circles but often not by the policyholders 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 comprehend the steps of how it works. The more you know about it, the more likely relevant proceedings will work out favorably.
Any insurance policy you hold is an assurance that, if something bad occurs, the business that covers the policy will make good in one way or another in a timely manner. If a hailstorm damages your house, your property insurance agrees to pay you or enable the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is often a time-consuming affair – and delay sometimes compounds the damage to the victim – insurance companies in many cases opt to pay up front and assign blame after the fact. They then need a way to recover the costs if, when there is time to look at all the facts, they weren't responsible for the payout.
You are in a highway accident. Another car crashed into yours. The police show up to assess the situation, 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 to blame and his insurance policy should have paid for the repair of your auto. How does your insurance company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurer is considered to have 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.
Why Should I Care?
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 insurer is lax about bringing subrogation cases to court, it might opt to recoup its costs by upping your premiums. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as criminal defense law Pleasant Grove UT, 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 examining the reputations of competing agencies to evaluate whether they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their customers advised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.