Subrogation is a term that's understood in insurance and legal circles but sometimes not by the people they represent. Even if it sounds complicated, it is in your self-interest to understand an overview of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
Any insurance policy you hold is a promise that, if something bad occurs, the insurer of the policy will make good in a timely manner. If you get injured while you're on the clock, for example, your employer's workers compensation agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially responsible for services or repairs is typically a heavily involved affair – and delay in some cases adds to the damage to the policyholder – insurance firms usually opt to pay up front and figure out the blame afterward. They then need a way to recoup the costs if, when there is time to look at all the facts, they weren't actually responsible for the expense.
Can You Give an Example?
You arrive at the hospital with a deeply cut finger. You hand the nurse your health insurance card and she takes down your plan details. You get stitches and your insurer is billed for the tab. But the next day, when you clock in at your workplace – where the accident happened – you are given workers compensation paperwork to fill out. Your employer's workers comp policy is in fact responsible for the invoice, not your health insurance. The latter has a right to recover its money somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the method 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. Ordinarily, only you can sue for damages done to your person 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.
How Does This Affect Policyholders?
For a start, if you have 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 timid on any subrogation case it might not win, it might opt to recoup its losses by upping your premiums and call it a day. On the other hand, if it has a competent legal team and pursues them efficiently, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full $1,000 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 the laws in your state.
Moreover, if the total loss 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 law Hillsboro, OR, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not the same. When shopping around, it's worth weighing the records of competing companies to determine whether they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders posted as the case goes on; and if they then process successfully won reimbursements quickly 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 protecting its income by raising your premiums, even attractive rates won't outweigh the eventual headache.