Subrogation is an idea that's understood among legal and insurance companies but rarely by the policyholders 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 the steps of the process. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance policy.
Every insurance policy you have is a promise that, if something bad occurs, the insurer of the policy will make good in one way or another in a timely fashion. If your house is broken into, for example, your property insurance agrees to compensate you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially accountable for services or repairs is usually a tedious, lengthy affair – and delay often compounds the damage to the policyholder – insurance companies in many cases decide 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 responsible for the payout.
Let's Look at an Example
You are in a highway accident. Another car crashed into yours. The police show up to assess the situation, 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 policy should have paid for the repair of your car. How does your insurance company get its money 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 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 done to your person or property. But under subrogation law, your insurance company is extended some of your rights in exchange 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.
How Does This Affect the Insured?
For starters, if your insurance policy stipulated 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 – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its losses by upping your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after those cases efficiently, it is doing you a favor as well as itself. If all $10,000 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 to blame), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total loss 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 immigration defense attorney Herriman UT, pursue subrogation and succeeds, it will recover your expenses as well as its own.
All insurers are not the same. When comparing, it's worth looking at the reputations of competing agencies to evaluate whether they pursue valid subrogation claims; if they do so quickly; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurance agency has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.