Subrogation and How It Affects Your Insurance Policy

Subrogation is an idea that's well-known among insurance and legal companies but often not by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to know the nuances of how it works. The more knowledgeable you are, the more likely it is that an insurance lawsuit will work out in your favor.

An insurance policy you own is a promise that, if something bad happens to you, the company on the other end of the policy will make restitutions in one way or another in a timely manner. If you get an injury at work, your company's workers compensation insurance 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 typically a confusing affair – and delay sometimes adds to the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame after the fact. They then need a path to recoup the costs if, in the end, they weren't actually in charge of the expense.

Let's Look at an Example

You are in a vehicle 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 that pays for the repairs right away. Later police tell the insurance companies that the other driver was to blame and his insurance should have paid for the repair of your car. How does your company get its money back?

How Subrogation Works

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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have some of your rights in exchange for making good on 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 one thing, if your insurance policy stipulated a deductible, your insurer 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 be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its losses by raising your premiums. On the other hand, if it has a capable legal team and pursues them aggressively, it is doing you a favor as well as itself. 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 one-half culpable), you'll typically get $500 back, depending on your state laws.

Additionally, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as work injury Dunwoody, pursue subrogation and wins, it will recover your losses in addition to its own.

All insurance agencies are not created equal. When shopping around, it's worth researching the reputations of competing agencies to find out if they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their customers updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurance company has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.