Subrogation is a concept that's well-known in insurance and legal 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 would be in your benefit to know the steps of the process. The more you know about it, the better decisions you can make about your insurance company.
Every insurance policy you own is a commitment that, if something bad occurs, the firm on the other end of the policy will make good in a timely fashion. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) decide who was at fault and that person's insurance pays out.
But since determining who is financially accountable for services or repairs is usually a time-consuming affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame later. They then need a means to regain the costs if, ultimately, they weren't actually in charge of the payout.
You go to the emergency room with a sliced-open finger. You give the receptionist your medical insurance card and he takes down your policy details. You get taken care of and your insurance company gets an invoice for the tab. But on the following day, when you clock in at your workplace – where the accident happened – you are given workers compensation forms to file. Your company's workers comp policy is actually responsible for the invoice, not your medical insurance. The latter has an interest in recovering its costs in some way.
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 done to your person or property. But under subrogation law, your insurance company is extended 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.
Why Do I Need to Know This?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company 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 lax about bringing subrogation cases to court, it might opt to recover its costs by raising your premiums. On the other hand, if it has a knowledgeable legal team and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all 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 culpable), you'll typically get half your deductible back, based on the laws in most states.
Moreover, if the total cost 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 living trust attorney Racine WI, successfully press a subrogation case, it will recover your costs as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth looking up the reputations of competing agencies to find out if they pursue legitimate subrogation claims; if they do so fast; if they keep their accountholders informed as the case proceeds; 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 record of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, you should keep looking.