Subrogation is a term that's understood in insurance and legal circles but often not by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to know the nuances of how it works. The more information you have, the better decisions you can make about your insurance company.
Any insurance policy you own is a promise that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If a storm damages your real estate, for instance, your property insurance steps in to remunerate you or enable the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is sometimes a time-consuming affair – and delay often increases the damage to the policyholder – insurance firms often opt to pay up front and assign blame afterward. They then need a way to recover the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.
Let's Look at an Example
You go to the Instacare with a deeply cut finger. You hand the nurse your health insurance card and she takes down your coverage details. You get stitches and your insurer is billed for the medical care. But on the following morning, when you clock in at your place of employment – where the injury occurred – your boss hands you workers compensation paperwork to turn in. Your workers comp policy is actually responsible for the costs, not your health insurance. The latter has an interest in recovering its money somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurer is considered to have 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.
How Does This Affect the Insured?
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 have a stake in the outcome as well – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its expenses by ballooning your premiums and call it a day. On the other hand, if it has a capable legal team and goes after them enthusiastically, it is doing you a favor as well as itself. 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 one-half accountable), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total expense 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 attorney Washington DC, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurers are not the same. When shopping around, it's worth measuring the records of competing firms to determine if they pursue winnable subrogation claims; if they do so with some expediency; if they keep their policyholders posted as the case continues; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurance company 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.