Subrogation is a term that's well-known in legal and insurance circles but rarely by the customers they represent. Even if it sounds complicated, it is in your self-interest to comprehend the nuances of the process. The more information you have, the better decisions you can make about your insurance policy.
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 in a fender-bender, insurance adjusters (and police, when necessary) decide who was to blame and that party's insurance covers the damages.
But since figuring out who is financially accountable for services or repairs is sometimes a time-consuming affair – and delay sometimes increases the damage to the victim – insurance companies usually opt to pay up front and assign blame afterward. They then need a path to get back the costs if, when all is said and done, they weren't in charge of the payout.
Let's Look at an Example
You are in a highway accident. Another car crashed into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. 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 auto. How does your insurance 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 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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurance company is extended 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 Do I Need to Know This?
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 – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its expenses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full $1,000 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, depending on the laws in your state.
In addition, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as personal injury law firm Mableton GA, successfully press a subrogation case, it will recover your costs as well as its own.
All insurers are not created equal. When shopping around, it's worth weighing the records of competing companies to evaluate if they pursue winnable subrogation claims; if they do so without delay; if they keep their accountholders apprised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.