Subrogation is a term that's understood among legal and insurance firms but sometimes not by the customers who employ them. Even if it sounds complicated, it is in your self-interest to understand an overview of how it works. The more knowledgeable you are, the better decisions you can make about your insurance company.
An insurance policy you have is an assurance that, if something bad occurs, the insurer of the policy will make good in a timely manner. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) decide who was at fault and that person's insurance pays out.
But since ascertaining who is financially accountable for services or repairs is regularly a tedious, lengthy affair – and delay sometimes compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and assign blame later. They then need a means to recoup the costs if, when there is time to look at all the facts, they weren't responsible for the expense.
Let's Look at an Example
You go to the doctor's office with a deeply cut finger. You give the receptionist your medical insurance card and she records your policy details. You get taken care of and your insurance company gets an invoice for the tab. But on the following morning, when you clock in at work – where the accident occurred – your boss hands you workers compensation paperwork to file. Your employer's workers comp policy is actually responsible for the bill, not your medical insurance. The latter has a right to recover its costs in some way.
How Does Subrogation Work?
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 person or property. But under subrogation law, your insurance company is given some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Individuals?
For one thing, if you have a deductible, it wasn't just your insurance company who 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 insurer is lax about bringing subrogation cases to court, it might opt to recoup its losses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them aggressively, 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 one-half at fault), you'll typically get $500 back, depending on the laws in your state.
Moreover, if the total price of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as employment law spanish fork ut, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance agencies are not the same. When shopping around, it's worth examining the records of competing companies to determine whether they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their customers advised as the case goes on; 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 insurance agency has a record of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.