Subrogation is a term that's well-known in insurance and legal circles but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to understand the steps of how it works. The more information you have, the better decisions you can make with regard to your insurance policy.
An insurance policy you have is a promise that, if something bad occurs, the company that covers the policy will make restitutions in one way or another without unreasonable delay. If a windstorm damages your property, for instance, your property insurance steps in to repay you or facilitate the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is usually a confusing affair – and delay in some cases compounds the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a method to recover the costs if, when all the facts are laid out, they weren't responsible for the payout.
Can You Give an Example?
You head to the hospital with a deeply cut finger. You give the receptionist your medical insurance card and she records your coverage details. You get stitched up and your insurer gets a bill for the medical care. But the next afternoon, when you arrive at your place of employment – where the accident occurred – you are given workers compensation paperwork to fill out. Your employer's workers comp policy is actually responsible for the bill, not your medical insurance. The latter has an interest in recovering its money in some way.
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. 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 done to your person or property. But under subrogation law, your insurer 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 Should I Care?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurer 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 recoup its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is acting both in its own interests and in yours. 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 the laws in your state.
In addition, if the total price 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 criminal defense law Springville UT, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurers are not the same. When comparing, it's worth contrasting the records of competing firms to find out if they pursue valid subrogation claims; if they do so without delay; if they keep their customers informed as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you'll feel the sting later.