Subrogation is a concept that's understood in insurance and legal circles but sometimes not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is 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 about your insurance policy.
Every insurance policy you have is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that party's insurance pays out.
But since figuring out who is financially responsible for services or repairs is typically a time-consuming affair – and delay often adds to the damage to the policyholder – insurance companies often decide to pay up front and assign blame afterward. They then need a way to recoup the costs if, in the end, they weren't responsible for the payout.
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 that pays for the repairs right away. Later it's determined that the other driver was entirely to blame and his insurance should have paid for the repair of your car. How does your insurance company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the way 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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is considered to have some of your rights 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 one thing, if your insurance policy stipulated a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recover its costs by increasing your premiums and call it a day. On the other hand, if it has a competent legal team and goes after those cases efficiently, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get $500 back, depending on your state laws.
Moreover, 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 lawsuit lawyer springville ut, pursue subrogation and succeeds, it will recover your costs as well as its own.
All insurance companies are not created equal. When comparing, it's worth weighing the records of competing companies to evaluate if they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their accountholders apprised 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, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.