Subrogation is an idea that's understood in legal and insurance circles but rarely by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to comprehend an overview of the process. The more information you have, the more likely relevant proceedings will work out favorably.
Every insurance policy you hold is an assurance that, if something bad happens to you, the firm on the other end of the policy will make good in a timely fashion. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that party's insurance pays out.
But since determining who is financially accountable for services or repairs is regularly a time-consuming affair – and time spent waiting sometimes adds to the damage to the victim – insurance firms in many cases decide to pay up front and figure out the blame after the fact. They then need a mechanism to regain the costs if, when all is said and done, they weren't responsible for the payout.
Let's Look at an Example
You are in an auto accident. Another car collided with yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was at fault and her insurance should have paid for the repair of your vehicle. How does your company get its money back?
How Does Subrogation Work?
This is where subrogation comes in. It is the method 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. Under ordinary circumstances, 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 in exchange for making good on 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 one thing, if your insurance policy stipulated 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 – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recover its expenses by increasing your premiums. On the other hand, if it has a proficient 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 accountable), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as divorce law 98501, pursue subrogation and wins, it will recover your losses as well as its own.
All insurance companies are not created equal. When comparing, it's worth looking up the records of competing firms to evaluate whether they pursue valid subrogation claims; if they resolve those claims with some expediency; if they keep their clients posted as the case continues; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, you should keep looking.