Subrogation is a term that's understood 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 nuances of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance policy.
Every insurance policy you have is an assurance that, if something bad occurs, the insurer of the policy will make good in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is often a time-consuming affair – and delay often compounds the damage to the policyholder – insurance firms usually decide to pay up front and assign blame after the fact. They then need a path to get back the costs if, ultimately, they weren't actually responsible for the payout.
Let's Look at an Example
You are in a traffic-light 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 it's determined that the other driver was entirely at fault and her insurance should have paid for the repair of your vehicle. How does your insurance 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 reimbursement 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 done to your self or property. But under subrogation law, your insurer is extended some of your rights 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 Should I Care?
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 be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its losses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all ten grand 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 responsible), you'll typically get half your deductible back, based on the laws in most states.
Moreover, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as Sumner Wa Car Accident Lawyer, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth scrutinizing the records of competing agencies to determine whether they pursue winnable subrogation claims; if they do so with some expediency; if they keep their accountholders posted as the case proceeds; 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, instead, an insurance agency has a record of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.