Subrogation is an idea that's understood in legal and insurance circles but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to know the nuances of the process. The more information you have about it, the better decisions you can make about your insurance policy.
An insurance policy you hold is an assurance that, if something bad occurs, the company that covers the policy will make good without unreasonable delay. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was to blame and that person's insurance covers the damages.
But since determining who is financially responsible for services or repairs is typically a confusing affair – and time spent waiting often increases the damage to the victim – insurance companies in many cases decide to pay up front and assign blame afterward. They then need a means to get back the costs if, in the end, they weren't actually responsible for the payout.
You rush into the doctor's office with a sliced-open finger. You give the receptionist your medical insurance card and she records your plan details. You get stitches and your insurance company gets an invoice for the services. But the next afternoon, when you get to work – where the injury happened – your boss hands you workers compensation forms to turn in. Your workers comp policy is in fact responsible for the expenses, not your medical insurance. The latter has an interest in recovering its costs somehow.
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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. Normally, only you can sue for damages done to your self 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 originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
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 opt to recover its losses by ballooning your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is doing you a favor as well as itself. If all of the money 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 half your deductible back, based on the laws in most states.
Moreover, if the total expense 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 insurance dispute attorneys Tacoma, WA, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth examining the reputations of competing firms to evaluate whether they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their clients informed 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 insurance agency 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.