Subrogation is a term that's well-known in insurance and legal circles but sometimes not by the policyholders who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to understand the nuances of the process. The more information you have, the better decisions you can make about your insurance policy.
An insurance policy you own is a commitment that, if something bad occurs, the business on the other end of the policy will make good in one way or another in a timely manner. If a storm damages your property, for instance, your property insurance agrees to remunerate you or enable the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is typically a confusing affair – and time spent waiting in some cases increases the damage to the policyholder – insurance companies usually decide to pay up front and figure out the blame after the fact. They then need a way to get back the costs if, when there is time to look at all the facts, they weren't actually in charge of the payout.
You are in an auto accident. Another car ran into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was to blame and her insurance policy should have paid for the repair of your auto. How does your company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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. Ordinarily, only you can sue for damages done to your person or property. But under subrogation law, your insurer is considered to have 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 Should I Care?
For a start, if your insurance policy stipulated a deductible, your insurer wasn't the only one that 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 insurance company is lax about bringing subrogation cases to court, it might choose to get back its losses by ballooning your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues them aggressively, 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 one-half to blame), you'll typically get $500 back, based on the laws in most states.
Furthermore, 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 family law provo, ut, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not the same. When shopping around, it's worth looking at the records of competing firms to determine whether they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their clients updated as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your losses 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 profit margin by raising your premiums, you should keep looking.