Subrogation is a concept that's understood among legal and insurance professionals but rarely by the policyholders 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 you know about it, the better decisions you can make about your insurance company.
Every insurance policy you have is a commitment that, if something bad occurs, the company on the other end of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that person's insurance pays out.
But since determining who is financially accountable for services or repairs is typically a confusing affair – and time spent waiting sometimes adds to the damage to the victim – insurance companies usually opt to pay up front and figure out the blame afterward. They then need a means to regain the costs if, when there is time to look at all the facts, they weren't actually in charge of the expense.
You are in a vehicle accident. Another car collided with yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was at fault and her insurance policy should have paid for the repair of your car. How does your insurance company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Under ordinary circumstances, only you can sue for damages to your self or property. But under subrogation law, your insurer is given some of your rights 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 Do I Need to Know This?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurer 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 choose to recover its expenses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get half your deductible back, depending on your state laws.
Additionally, if the total cost 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 workers compensation coverage Purcellville, VA, successfully press a subrogation case, it will recover your costs as well as its own.
All insurance companies are not the same. When shopping around, it's worth looking up the reputations of competing agencies to evaluate if they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their customers informed as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your deductible 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 profit margin by raising your premiums, you'll feel the sting later.