Subrogation and How It Affects Policyholders

Subrogation is a concept that's well-known among insurance and legal companies but sometimes not by the policyholders who hire them. Even if it sounds complicated, it is in your self-interest to know an overview of how it works. The more you know, the better decisions you can make with regard to your insurance policy.

An insurance policy you own is a promise that, if something bad happens to you, the firm 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 courts, when necessary) decide who was at fault and that person's insurance covers the damages.

But since figuring out who is financially accountable for services or repairs is often a confusing affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame after the fact. They then need a way to get back the costs if, in the end, they weren't actually responsible for the expense.

For Example

You are in a highway accident. Another car crashed into yours. The police show up to assess the situation, 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 entirely at fault and her insurance policy should have paid for the repair of your auto. How does your company get its funds 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 considered to have 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 Should I Care?

For one thing, 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 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 get back its losses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them aggressively, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full thousand-dollar 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 family law services Portland OR, pursue subrogation and wins, it will recover your losses as well as its own.

All insurance agencies are not created equal. When shopping around, it's worth measuring the reputations of competing agencies to evaluate whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their accountholders informed as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your losses 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 covering its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.