Subrogation and How It Affects You

Subrogation is an idea that's understood among insurance and legal companies but rarely by the customers who employ them. Even if you've never heard the word before, it would be in your self-interest to know an overview of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.

Any insurance policy you hold is an assurance that, if something bad happens to you, the company that covers the policy will make restitutions in one way or another without unreasonable delay. If you get hurt at work, your company's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially accountable for services or repairs is typically a time-consuming affair – and time spent waiting often increases the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a mechanism to recoup the costs if, when all is said and done, they weren't actually responsible for the expense.

Can You Give an Example?

You are in a highway accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was entirely to blame and her insurance should have paid for the repair of your vehicle. 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. Usually, 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 originally due to you, because it has covered the amount already.

How Does This Affect the Insured?

For starters, 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 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 expenses by raising your premiums and call it a day. On the other hand, if it has a capable legal team and goes after those cases efficiently, it is acting both in its own interests and in yours. If all of the money 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 the laws in your state.

In addition, if the total loss 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 Auto Accident Lawyer in Marietta, Ga, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurers are not the same. When comparing, it's worth looking up the records of competing agencies to evaluate whether they pursue valid subrogation claims; if they do so quickly; if they keep their accountholders advised as the case goes on; and if they then process successfully won reimbursements immediately 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 honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you'll feel the sting later.