Subrogation and How It Affects Your Insurance Policy

Subrogation is a term that's well-known in legal and insurance circles but often not by the people they represent. Even if you've never heard the word before, it would be to your advantage to know the steps of the process. The more information you have, the more likely it is that relevant proceedings will work out favorably.

An insurance policy you hold is an assurance that, if something bad occurs, the firm on the other end of the policy will make good in one way or another in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine 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 time-consuming affair – and time spent waiting often increases the damage to the policyholder – insurance companies in many cases opt to pay up front and assign blame after the fact. They then need a method to recoup the costs if, once the situation is fully assessed, they weren't in charge of the payout.

Can You Give an Example?

You arrive at the emergency room with a gouged finger. You hand the receptionist your health insurance card and she writes down your policy details. You get stitches and your insurer gets an invoice for the tab. But on the following afternoon, when you arrive at your workplace – where the injury happened – your boss hands you workers compensation forms to fill out. Your company's workers comp policy is actually responsible for the expenses, not your health insurance policy. It has a vested interest in getting that money back in some way.

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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 person or property. But under subrogation law, your insurer is given some of your rights in exchange 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 Does This Matter to Me?

For starters, if you have a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its costs by raising your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get $500 back, based on the laws in most states.

Moreover, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as car accident attorney Austell GA, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurance companies are not created equal. When comparing, it's worth looking at the records of competing agencies to determine whether they pursue valid subrogation claims; if they do so quickly; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, on the other hand, an insurance agency has a record of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.