Subrogation is an idea that's understood in legal and insurance circles but sometimes not by the people 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 understand the steps of the process. The more you know about it, the more likely relevant proceedings will work out in your favor.
An insurance policy you have is a promise that, if something bad happens to you, the business that covers the policy will make good in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) decide who was to blame and that party's insurance covers the damages.
But since determining who is financially responsible for services or repairs is typically a tedious, lengthy affair – and delay often increases the damage to the victim – insurance firms often decide to pay up front and assign blame after the fact. They then need a method to recover the costs if, in the end, they weren't in charge of the expense.
Let's Look at an Example
You are in a vehicle accident. Another car crashed into 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 to blame and her insurance policy should have paid for the repair of your car. How does your company get its funds back?
How Does Subrogation Work?
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 companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange 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 Should I Care?
For a start, if you have a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to get back its expenses by ballooning your premiums. 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 ten grand is recovered, you will get your full $1,000 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, depending on your state laws.
Additionally, if the total expense 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 law firm Spanish Fork UT, pursue subrogation and wins, it will recover your losses in addition to its own.
All insurers are not created equal. When comparing, it's worth researching the records of competing companies to determine whether they pursue winnable subrogation claims; if they do so with some expediency; if they keep their accountholders updated as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible 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 covering its profitability by raising your premiums, you'll feel the sting later.