Subrogation is a term that's understood in insurance and legal circles but often not by the policyholders they represent. Even if you've never heard the word before, it would be in your benefit to understand an overview of how it works. The more you know, the more likely relevant proceedings will work out favorably.
Any insurance policy you hold is an assurance that, if something bad occurs, the insurer of the policy will make good in one way or another in a timely manner. If a storm damages your house, your property insurance steps in to repay you or facilitate the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and delay often increases the damage to the victim – insurance companies in many cases decide to pay up front and figure out the blame later. They then need a way to recoup the costs if, when there is time to look at all the facts, they weren't actually in charge of the expense.
Let's Look at an Example
You arrive at the hospital with a deeply cut finger. You hand the receptionist your medical insurance card and he writes down your plan details. You get stitches and your insurance company gets a bill for the medical care. But on the following morning, when you get to your place of employment – where the accident happened – you are given workers compensation forms to fill out. Your company's workers comp policy is actually responsible for the costs, not your medical insurance company. The latter has a right to recover its costs somehow.
How Does Subrogation Work?
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 insurance firms 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 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 one thing, if you have a deductible, it wasn't just your insurance company 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 opt to recover its losses by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them efficiently, 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, depending on the laws in your state.
Moreover, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workmans comp Alpharetta, successfully press a subrogation case, it will recover your costs as well as its own.
All insurers are not the same. When comparing, it's worth contrasting the records of competing agencies to find out whether they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their customers posted as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.