Subrogation and How It Affects Policyholders

Subrogation is a term that's well-known among insurance and legal firms but often not by the customers who employ them. Rather than leave it to the professionals, it is in your self-interest to understand the nuances of the process. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance company.

Every insurance policy you have is a commitment that, if something bad occurs, the firm that insures the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that party's insurance pays out.

But since ascertaining who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and delay in some cases compounds the damage to the policyholder – insurance companies often decide to pay up front and figure out the blame later. They then need a mechanism to get back the costs if, ultimately, they weren't actually responsible for the expense.

Can You Give an Example?

You rush into the hospital with a deeply cut finger. You hand the receptionist your medical insurance card and she takes down your coverage information. You get stitches and your insurance company is billed for the services. But on the following morning, when you clock in at your place of employment – where the accident occurred – your boss hands you workers compensation forms to fill out. Your workers comp policy is actually responsible for the hospital visit, not your medical insurance company. The latter has an interest in recovering its costs in some way.

How Subrogation Works

This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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 to your self or property. But under subrogation law, your insurance company is given some of your rights 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 a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company who 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its expenses by boosting your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all $10,000 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 culpable), you'll typically get $500 back, depending on the laws in your state.

Furthermore, if the total expense 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 criminal defense lawyer Portland OR, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurers are not created equal. When shopping around, it's worth examining the reputations of competing companies to determine if they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their accountholders posted as the case continues; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurance company has a reputation of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.