Subrogation and How It Affects Policyholders

Subrogation is an idea that's well-known in insurance and legal circles but rarely by the customers who hire them. Rather than leave it to the professionals, it is to your advantage to understand an overview of how it works. The more information you have, the more likely it is that an insurance lawsuit will work out in your favor.

An insurance policy you own is a promise that, if something bad happens to you, the business on the other end of the policy will make restitutions in one way or another without unreasonable delay. If you get hurt while working, for example, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since ascertaining who is financially accountable for services or repairs is regularly a confusing affair – and delay sometimes adds to the damage to the policyholder – insurance companies often decide to pay up front and assign blame after the fact. They then need a path to recover the costs if, when all is said and done, they weren't actually in charge of the expense.

Can You Give an Example?

You are in a vehicle accident. Another car ran into yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was at fault and his insurance policy should have paid for the repair of your car. How does your company get its funds back?

How Subrogation Works

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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is extended some of your rights in exchange 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 Does This Matter to Me?

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 lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by upping your premiums. On the other hand, if it has a knowledgeable legal team and pursues them efficiently, it is acting both in its own interests and in yours. 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 one-half at fault), you'll typically get half your deductible back, based on the laws in most states.

Furthermore, 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 local attorney Tumwater, WA, pursue subrogation and wins, it will recover your costs as well as its own.

All insurance agencies are not the same. When shopping around, it's worth examining the reputations of competing agencies to find out if they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a reputation 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.