Subrogation is a concept that's understood among legal and insurance professionals but rarely by the customers who employ them. Rather than leave it to the professionals, it would be in your self-interest to know the nuances of how it works. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance policy.
An insurance policy you have is a promise that, if something bad happens to you, the company on the other end of the policy will make restitutions without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) decide who was to blame and that party's insurance pays out.
But since ascertaining who is financially accountable for services or repairs is regularly a heavily involved affair – and delay sometimes compounds the damage to the victim – insurance firms usually decide 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 responsible for the expense.
Can You Give an Example?
You go to the hospital with a sliced-open finger. You give the receptionist your health insurance card and he records your policy information. You get stitches and your insurance company gets a bill for the medical care. But on the following afternoon, when you get to your workplace – where the injury happened – you are given workers compensation forms to file. Your workers comp policy is in fact responsible for the expenses, not your health insurance. The latter has an interest in recovering its money somehow.
How Subrogation Works
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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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 Individuals?
For one thing, if you have a deductible, it wasn't just your insurance company 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 insurer is lax about bringing subrogation cases to court, it might choose to get back its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get $500 back, depending on the laws in your state.
Moreover, if the total cost 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 criminal defense law Spanish Fork UT, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurers are not created equal. When shopping around, it's worth scrutinizing the records of competing firms to find out whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their accountholders informed 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 insurer has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.