Subrogation and How It Affects Your Insurance Policy

Subrogation is a term that's well-known among legal and insurance companies but often not by the policyholders 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 understand the nuances of the process. The more knowledgeable you are about it, the more likely it is that relevant proceedings will work out in your favor.

Every insurance policy you own is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If you get hurt on the job, your company's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially accountable for services or repairs is usually a tedious, lengthy affair – and time spent waiting often adds to the damage to the policyholder – insurance firms usually decide to pay up front and assign blame afterward. They then need a way to regain the costs if, in the end, they weren't in charge of the expense.

Let's Look at an Example

You arrive at the Instacare with a sliced-open finger. You hand the receptionist your health insurance card and he writes down your coverage information. You get stitches and your insurer gets a bill for the expenses. But the next afternoon, when you clock in at your workplace – where the accident occurred – your boss hands you workers compensation paperwork to turn in. Your workers comp policy is actually responsible for the bill, not your health insurance policy. The latter has an interest in recovering its costs in some way.

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended 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 insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recover its expenses by upping your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is doing you a favor as well as itself. If all 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 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 may have had to pay the difference. If your insurance company or its property damage lawyers, such as criminal defense lawyer Pleasant Grove UT, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurers are not the same. When shopping around, it's worth measuring the reputations of competing agencies to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their customers updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurance company has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.