Subrogation is an idea that's understood in legal and insurance circles but sometimes not by the policyholders who employ them. Even if it sounds complicated, it would be to your advantage to know the steps of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance company.

Any insurance policy you own is a commitment that, if something bad occurs, the business that covers the policy will make good in a timely manner. If your home burns down, for example, your property insurance agrees to repay you or pay for the repairs, subject to state property damage laws.

But since ascertaining who is financially accountable for services or repairs is sometimes a heavily involved affair – and delay sometimes increases the damage to the victim – insurance companies usually opt to pay up front and figure out the blame afterward. They then need a way to regain the costs if, when all the facts are laid out, they weren't actually in charge of the expense.

Let's Look at an Example

You are in a vehicle accident. Another car collided with yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was entirely to blame and her insurance should have paid for the repair of your vehicle. How does your insurance company get its funds back?

How Subrogation Works

This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurance company 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 Do I Need to Know This?

For starters, if you have a deductible, it wasn't just your insurance company who 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 insurance company is timid on any subrogation case it might not win, it might opt to recover its costs by ballooning your premiums. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, 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 one-half to blame), you'll typically get half your deductible back, based on the laws in most states.

In addition, if the total loss 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 criminal law defense lawyer Portland OR, pursue subrogation and wins, it will recover your losses in addition to its own.

All insurance agencies are not the same. 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 in a reasonable amount of time; if they keep their customers apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurance company has a record of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.