Subrogation is a term that's well-known in legal and insurance circles but sometimes not by the people who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to understand the steps of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance policy.
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 without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance covers the damages.
But since figuring out who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and delay sometimes increases the damage to the policyholder – insurance firms usually opt to pay up front and assign blame later. They then need a means to get back the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
Let's Look at an Example
You are in a highway accident. Another car collided with 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 at fault and his insurance policy should have paid for the repair of your auto. How does your company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the process 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. Usually, only you can sue for damages to your self or property. But under subrogation law, your insurance company is extended some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For starters, if you have a deductible, it wasn't just your insurance company 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 unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its expenses by raising your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after them efficiently, it is doing you a favor as well as itself. If all 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 half your deductible back, based on the laws in most states.
Moreover, if the total cost of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as criminal lawyer Hillsboro, OR, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance agencies are not created equal. When comparing, it's worth looking at the records of competing companies to determine whether they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their policyholders informed as the case continues; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, you should keep looking.