What You Need to Know About Subrogation

Subrogation is an idea that's well-known among legal and insurance firms but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to know an overview of how it works. The more you know, the better decisions you can make with regard to your insurance company.

An insurance policy you have is an assurance that, if something bad occurs, the firm that insures the policy will make restitutions in one way or another without unreasonable delay. If you get injured on the job, for instance, your employer's workers compensation insurance picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially responsible for services or repairs is often a time-consuming affair – and delay often adds to the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame later. They then need a mechanism to recoup the costs if, when all is said and done, they weren't in charge of the payout.

Let's Look at an Example

You head to the emergency room with a sliced-open finger. You hand the receptionist your medical insurance card and he writes down your coverage details. You get taken care of and your insurer gets a bill for the medical care. But the next morning, when you clock in at your place of employment – where the accident happened – your boss hands you workers compensation paperwork to turn in. Your workers comp policy is in fact responsible for the bill, not your medical insurance. It has a vested interest in getting that money back somehow.

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. 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 done to your self 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.

How Does This Affect Individuals?

For starters, if your insurance policy stipulated 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 insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its losses by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get $500 back, based on the laws in most states.

Furthermore, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workers comp lawyer Paddock Lake, WI, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurers are not the same. When comparing, it's worth looking up the records of competing companies to evaluate whether they pursue winnable subrogation claims; if they do so without delay; if they keep their clients updated as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its profit margin by raising your premiums, you should keep looking.