Subrogation and How It Affects You

Subrogation is a term that's well-known among insurance and legal professionals but often not by the policyholders they represent. Even if you've never heard the word before, it would be in your self-interest to understand the nuances of the process. The more knowledgeable you are, the more likely an insurance lawsuit will work out in your favor.

Every insurance policy you own is a commitment that, if something bad occurs, the company that covers the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and police, 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 time spent waiting sometimes compounds the damage to the policyholder – insurance firms usually decide to pay up front and assign blame afterward. They then need a mechanism to recoup the costs if, once the situation is fully assessed, they weren't responsible for the payout.

For Example

You rush into the hospital with a gouged finger. You give the nurse your health insurance card and he records your plan details. You get stitched up and your insurance company gets a bill for the services. But on the following day, when you arrive at your workplace – where the accident happened – your boss hands you workers compensation paperwork to fill out. Your employer's workers comp policy is in fact responsible for the bill, not your health insurance policy. It has a vested interest in getting that money back somehow.

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 self or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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 Policyholders?

For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recoup its costs by upping your premiums. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get $500 back, based on the laws in most states.

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 criminal defense attorney Springville UT, successfully press a subrogation case, it will recover your costs as well as its own.

All insurers are not the same. When comparing, it's worth weighing the records of competing agencies to find out whether they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their policyholders apprised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurance firm has a reputation of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.