Subrogation and How It Affects Policyholders

Subrogation is an idea 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 an overview of the process. The more knowledgeable you are, the more likely relevant proceedings will work out in your favor.

Every insurance policy you have is an assurance that, if something bad occurs, the firm on the other end of the policy will make good in a timely manner. If your vehicle is hit, insurance adjusters (and the courts, when necessary) determine who was at fault and that person's insurance pays out.

But since figuring out who is financially accountable for services or repairs is sometimes a time-consuming affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame later. They then need a mechanism to recoup the costs if, when all is said and done, they weren't actually responsible for the expense.

Can You Give an Example?

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 police tell the insurance companies that the other driver was at fault and his insurance policy should have paid for the repair of your car. How does your company get its funds back?

How Does Subrogation Work?

This is where subrogation comes in. It is the process 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. Normally, only you can sue for damages to your self 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 Do I Need to Know This?

For a start, 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 have a stake in the outcome as well – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its costs by upping your premiums. On the other hand, if it has a capable 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 50 percent at fault), you'll typically get $500 back, based on the laws in most states.

Furthermore, if the total cost 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 workers comp lawyer Columbus, ga, pursue subrogation and succeeds, it will recover your losses as well as its own.

All insurance companies are not the same. When shopping around, it's worth contrasting the records of competing companies to determine if they pursue legitimate subrogation claims; if they do so quickly; if they keep their customers updated as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.