Subrogation is an idea that's well-known among legal and insurance companies but rarely by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to know the steps of how it works. The more knowledgeable you are about it, the more likely an insurance lawsuit will work out in your favor.
An insurance policy you own is a commitment that, if something bad occurs, the insurer of the policy will make good in one way or another without unreasonable delay. If a blizzard damages your home, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and delay sometimes increases the damage to the policyholder – insurance firms in many cases opt to pay up front and figure out the blame afterward. They then need a mechanism to recover the costs if, when all is said and done, they weren't actually responsible for the expense.
Can You Give an Example?
You rush into the doctor's office with a gouged finger. You give the nurse your medical insurance card and she writes down your coverage details. You get stitches and your insurer gets a bill for the expenses. But on the following morning, when you get to your workplace – where the injury happened – your boss hands you workers compensation forms to fill out. Your employer's workers comp policy is in fact responsible for the hospital visit, not your medical insurance. It has a vested interest in getting that money back somehow.
How Subrogation Works
This is where subrogation comes in. It is the way that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For starters, if you have a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recover its expenses by upping your premiums and call it a day. On the other hand, if it has a competent legal team and pursues those cases enthusiastically, 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 one-half accountable), you'll typically get $500 back, based on the laws in most states.
Moreover, 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 criminal defense lawyer Provo UT, pursue subrogation and succeeds, it will recover your losses as well as its own.
All insurers are not created equal. When shopping around, it's worth contrasting the records of competing firms to find out whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their customers advised as the case proceeds; 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 insurance agency has a record of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, you'll feel the sting later.