Subrogation and How It Affects Policyholders

Subrogation is a term that's well-known among insurance and legal firms but sometimes not by the customers they represent. Even if it sounds complicated, it would be in your self-interest to know an overview of how it works. The more information you have about it, the more likely relevant proceedings will work out in your favor.

Every insurance policy you hold is an assurance that, if something bad occurs, the firm on the other end of the policy will make restitutions in one way or another in a timely fashion. If your property is broken into, your property insurance steps in to repay you or enable the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is usually a heavily involved affair – and delay in some cases increases the damage to the policyholder – insurance companies usually decide to pay up front and assign blame afterward. They then need a mechanism to regain the costs if, when all the facts are laid out, they weren't actually responsible for the expense.

For Example

You are in a vehicle accident. Another car crashed into yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was to blame and his insurance should have paid for the repair of your vehicle. How does your insurance company get its funds back?

How Subrogation Works

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. Ordinarily, only you can sue for damages to your self or property. But under subrogation law, your insurance company is considered to have some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Do I Need to Know This?

For starters, if you have a deductible, your insurance company 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 be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recover its costs by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get $500 back, based on the laws in most states.

Moreover, 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 legal assistance salem ut, pursue subrogation and succeeds, it will recover your costs in addition to its own.

All insurers are not created equal. When shopping around, it's worth looking up the reputations of competing firms to evaluate whether they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders informed as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, you'll feel the sting later.