Subrogation and How It Affects Your Insurance

Subrogation is a term that's understood in legal and insurance circles but rarely by the policyholders who employ them. Even if you've never heard the word before, it would be to your advantage to know an overview of how it works. The more information you have, the better decisions you can make about your insurance company.

Any insurance policy you hold is a promise 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 you get hurt while you're on the clock, for instance, your employer's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.

But since ascertaining who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting often increases the damage to the victim – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a method to regain the costs if, when there is time to look at all the facts, they weren't in charge of the expense.

Let's Look at an Example

You are in a vehicle accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was entirely at fault and her insurance policy should have paid for the repair of your car. How does your insurance 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 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. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer is given some of your rights for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.

Why Do I Need to Know This?

For one thing, 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 lost some money too – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to recover its losses by increasing your premiums. On the other hand, if it has a knowledgeable legal team and pursues them aggressively, it is acting both in its own interests and in yours. 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 50 percent at fault), you'll typically get half your deductible back, depending on your state laws.

In addition, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workers compensation attorney Lake Geneva WI, pursue subrogation and succeeds, it will recover your costs as well as its own.

All insurance companies are not created equal. When comparing, it's worth researching the records of competing agencies to determine whether they pursue valid subrogation claims; if they do so without dragging their feet; 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 losses back and move on with your life. If, on the other hand, an insurance firm has a record of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.