Subrogation and How It Affects Policyholders

Subrogation is a concept that's well-known in legal and insurance circles but rarely by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand an overview of how it works. The more knowledgeable you are, the more likely it is that an insurance lawsuit will work out favorably.

Every insurance policy you hold is a promise that, if something bad happens to you, the insurer of the policy will make restitutions in a timely manner. If your home is broken into, for instance, your property insurance agrees to repay you or facilitate the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is often a time-consuming affair – and time spent waiting sometimes increases the damage to the policyholder – insurance companies usually opt to pay up front and figure out the blame after the fact. They then need a way to regain the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.

Let's Look at an Example

You are in a highway accident. Another car collided with yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was entirely at fault and his insurance should have paid for the repair of your vehicle. How does your insurance company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurance company 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.

How Does This Affect the Insured?

For one thing, 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 the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to get back its costs by upping your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is doing you a favor as well as itself. 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 one-half responsible), you'll typically get $500 back, depending on your state laws.

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 attorney Portland, OR, successfully press a subrogation case, it will recover your losses as well as its own.

All insurance agencies are not the same. When comparing, it's worth looking at the reputations of competing agencies to evaluate whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their customers advised as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, you should keep looking.