Subrogation and How It Affects Policyholders

Subrogation is a concept that's understood in insurance and legal circles but sometimes not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to understand an overview of how it works. The more knowledgeable you are, the better decisions you can make about your insurance policy.

Every insurance policy you have is an assurance that, if something bad occurs, the company on the other end of 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) decide who was to blame and that party's insurance covers the damages.

But since figuring out who is financially responsible for services or repairs is sometimes a heavily involved affair – and time spent waiting in some cases increases the damage to the victim – insurance companies often opt to pay up front and assign blame afterward. They then need a mechanism to regain the costs if, ultimately, they weren't in charge of the payout.

Can You Give an Example?

You arrive at the emergency room with a deeply cut finger. You hand the receptionist your medical insurance card and he records your policy details. You get stitches and your insurer gets an invoice for the expenses. But the next day, when you arrive at your workplace – where the accident occurred – you are given workers compensation paperwork to fill out. Your employer's workers comp policy is actually responsible for the costs, not your medical insurance policy. It has a vested interest in getting that money back somehow.

How Subrogation Works

This is where subrogation comes in. It is the process 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 to your self 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.

Why Should I Care?

For starters, if you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its expenses by upping your premiums. On the other hand, if it knows which cases it is owed 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 thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get half your deductible back, depending on the laws in your state.

Moreover, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as auto accident decatur ga, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurers are not created equal. When comparing, it's worth weighing the reputations of competing firms to determine whether they pursue winnable subrogation claims; if they do so without delay; if they keep their policyholders updated as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurer has a reputation 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.