What You Need to Know About Subrogation

Subrogation is a term that's understood in insurance and legal circles but rarely by the policyholders who hire them. Even if it sounds complicated, it would be in your benefit to comprehend the nuances of the process. The more information you have about it, the better decisions you can make with regard to your insurance policy.

Any insurance policy you hold is an assurance that, if something bad occurs, the business that insures the policy will make good in one way or another without unreasonable delay. If your home is burglarized, your property insurance steps in to compensate you or enable the repairs, subject to state property damage laws.

But since determining who is financially accountable for services or repairs is often a tedious, lengthy affair – and delay sometimes adds to the damage to the policyholder – insurance companies in many cases decide to pay up front and figure out the blame after the fact. They then need a means to get back 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 are in a highway accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was entirely to blame and his insurance should have paid for the repair of your vehicle. How does your insurance company get its funds back?

How Subrogation Works

This is where subrogation comes in. It is the method 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 insurance company is given some of your rights in exchange for making good on the damages. It can go after the money that was originally due to you, because it has covered the amount already.

Why Does This Matter to Me?

For one thing, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to get back its losses by boosting your premiums. On the other hand, if it has a knowledgeable legal team and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full 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, depending on the laws in your state.

Moreover, if the total cost 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 puyallup personal injury attorney, pursue subrogation and succeeds, it will recover your expenses in addition to its own.

All insurers are not created equal. When comparing, it's worth examining the records of competing agencies to find out if they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their customers advised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.