Subrogation and How It Affects Policyholders

Subrogation is a concept that's well-known among legal and insurance companies but sometimes not by the customers they represent. Even if you've never heard the word before, it would be in your self-interest to comprehend the nuances of how it works. The more information you have, the better decisions you can make with regard to your insurance company.

Any insurance policy you have is an assurance that, if something bad happens to you, the insurer of the policy will make good in one way or another without unreasonable delay. If you get hurt at work, for instance, your company's workers compensation insurance pays out 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 often a time-consuming affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame after the fact. They then need a way to recover the costs if, in the end, they weren't actually in charge of the payout.

Let's Look at an Example

You head to the hospital with a sliced-open finger. You hand the nurse your health insurance card and he records your policy information. You get stitches and your insurance company gets a bill for the tab. But on the following morning, when you clock in at your place of employment – where the injury occurred – your boss hands you workers compensation forms to turn in. Your employer's workers comp policy is in fact responsible for the expenses, not your health insurance company. It has a vested interest in getting that money back somehow.

How Does Subrogation Work?

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 to your self or property. But under subrogation law, your insurance company is considered to have some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

How Does This Affect Policyholders?

For a start, if you have a deductible, your insurance company 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 lax about bringing subrogation cases to court, it might choose to get back its losses by ballooning your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues those cases 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 one-half culpable), you'll typically get half your deductible back, depending on the laws in your state.

Furthermore, if the total cost 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 car accident lawyer Lithia Springs GA, pursue subrogation and succeeds, it will recover your losses as well as its own.

All insurance companies are not created equal. When comparing, it's worth looking at the records of competing companies to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their clients updated 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, instead, an insurance firm has a record of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.