Subrogation is a concept that's well-known among insurance and legal professionals but rarely by the policyholders they represent. Even if it sounds complicated, it would be in your self-interest to understand the steps of how it works. The more you know, the better decisions you can make about your insurance company.

Any insurance policy you own is a commitment that, if something bad occurs, the company that covers the policy will make good in a timely manner. If you get injured on the job, for example, 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 ascertaining who is financially responsible for services or repairs is usually a time-consuming affair – and time spent waiting often compounds the damage to the victim – insurance companies often opt to pay up front and figure out the blame later. They then need a means to recoup the costs if, in the end, they weren't actually responsible for the payout.

Let's Look at an Example

You head to the Instacare with a deeply cut finger. You give the receptionist your medical insurance card and she takes down your policy details. You get stitched up and your insurance company gets a bill for the medical care. But on the following afternoon, when you get to work – where the accident occurred – your boss hands you workers compensation paperwork to fill out. Your employer's workers comp policy is in fact responsible for the expenses, not your medical insurance policy. The latter has a right to recover its costs 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 companies 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 insurance company is given some of your rights 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.

Why Does This Matter to Me?

For a start, if you have a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to get back its expenses by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, 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 accountable), you'll typically get $500 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 defense lawyer Portland OR, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurance companies are not created equal. When shopping around, it's worth examining the records of competing agencies to find out if they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their customers posted 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, on the other hand, an insurance agency has a record of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, you'll feel the sting later.