Subrogation is a concept that's understood in insurance and legal circles but sometimes not by the policyholders they represent. Even if it sounds complicated, it would be in your benefit to know the nuances of how it works. The more information you have about it, the better decisions you can make about your insurance policy.
An insurance policy you have is a promise that, if something bad happens to you, the insurer of the policy will make restitutions in a timely fashion. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) decide who was to blame and that party's insurance pays out.
But since figuring out who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and delay often adds to the damage to the victim – insurance companies usually opt to pay up front and assign blame afterward. They then need a method to recover the costs if, when all is said and done, they weren't actually responsible for the expense.
Let's Look at an Example
You arrive at the hospital with a sliced-open finger. You give the receptionist your medical insurance card and he writes down your policy information. You get taken care of and your insurer is billed for the medical care. But the next morning, when you clock in at your workplace – where the accident happened – your boss hands you workers compensation paperwork to fill out. Your workers comp policy is in fact responsible for the invoice, not your medical insurance policy. The latter has a right to recover its costs in some way.
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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. Usually, only you can sue for damages to your self or property. But under subrogation law, your insurer 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.
Why Do I Need to Know This?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its losses by raising your premiums. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is acting both in its own interests and in yours. 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 one-half culpable), you'll typically get $500 back, depending on your state laws.
Furthermore, 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 family law lawyer Olympia, WA, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurance companies are not created equal. When shopping around, it's worth looking at the reputations of competing agencies to determine whether they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their customers informed as the case goes on; and if they then process successfully won reimbursements right away 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 honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.