Subrogation is a concept that's well-known among legal and insurance companies but rarely by the policyholders who employ them. Even if you've never heard the word before, it is in your self-interest to understand an overview of how it works. The more you know about it, the more likely relevant proceedings will work out in your favor.
Every insurance policy you own is a promise that, if something bad occurs, the company on the other end of the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) decide who was at fault and that person's insurance covers the damages.
But since determining who is financially accountable for services or repairs is usually a confusing affair – and delay sometimes increases the damage to the policyholder – insurance firms often decide to pay up front and assign blame after the fact. They then need a way to recover the costs if, when there is time to look at all the facts, they weren't in charge of the payout.
Can You Give an Example?
You are in a vehicle 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 it's determined that the other driver was entirely at fault and his insurance policy should have paid for the repair of your car. 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 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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurer is given 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 Does This Matter to Me?
For one thing, if you have a deductible, your insurer 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 be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to get back its losses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total price of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as immigration law firm Herriman UT, pursue subrogation and succeeds, it will recover your costs in addition to its own.
All insurers are not the same. When comparing, it's worth scrutinizing the reputations of competing firms to find out if they pursue valid subrogation claims; if they do so with some expediency; if they keep their clients posted 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, instead, an insurance firm has a record of paying out claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.