Subrogation is a concept that's understood in legal and insurance circles but often not by the policyholders they represent. Even if you've never heard the word before, it is in your self-interest to know an overview of the process. The more information you have about it, the better decisions you can make about your insurance policy.
An insurance policy you own is an assurance that, if something bad happens to you, the insurer of the policy will make good in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was at fault and that party's insurance covers the damages.
But since ascertaining who is financially accountable for services or repairs is usually a confusing affair – and delay sometimes adds to the damage to the policyholder – insurance firms usually opt to pay up front and figure out the blame after the fact. They then need a way to get back the costs if, when all is said and done, they weren't in charge of the expense.
Can You Give an Example?
You go to the emergency room with a sliced-open finger. You give the nurse your health insurance card and she writes down your policy details. You get stitched up and your insurer gets an invoice for the expenses. But on the following day, when you clock in at your place of employment – where the injury occurred – your boss hands you workers compensation paperwork to turn in. Your workers comp policy is in fact responsible for the bill, not your health insurance company. It has a vested interest in getting that money back in some way.
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim payment 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. 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 originally due to you, because it has covered the amount already.
How Does This Affect the Insured?
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 – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its costs by upping your premiums. On the other hand, if it has a capable legal team and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all is recovered, you will get your full thousand-dollar 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 your state laws.
In addition, if the total expense of an accident is over your maximum coverage amount, you could be in for a stiff bill. 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 expenses as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth weighing the records of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims without dragging their feet; if they keep their clients updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its bottom line by raising your premiums, you'll feel the sting later.