Subrogation is a term that's understood in insurance and legal circles but often not by the policyholders who employ them. Rather than leave it to the professionals, it is in your benefit to comprehend the nuances of how it works. The more information you have about it, the more likely an insurance lawsuit will work out favorably.
An insurance policy you hold is a commitment that, if something bad occurs, the company on the other end of the policy will make good in a timely fashion. If you get injured while you're on the clock, for example, your employer's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is usually a heavily involved affair – and time spent waiting sometimes compounds the damage to the victim – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a path to regain the costs if, ultimately, they weren't actually in charge of the expense.
You are in an auto accident. Another car collided with yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was entirely at fault and her insurance policy should have paid for the repair of your auto. How does your insurance company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the method 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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have 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.
How Does This Affect Me?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurer 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 unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is doing you a favor as well as itself. 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 responsible), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total cost 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 workmen's compensation Duluth, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurance companies are not the same. When shopping around, it's worth comparing the reputations of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their policyholders informed as the case proceeds; and if they then process successfully won reimbursements right away 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 protecting its bottom line by raising your premiums, you should keep looking.