Subrogation is an idea that's well-known among insurance and legal professionals 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 in your self-interest to know an overview of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
An insurance policy you have is a commitment that, if something bad happens to you, the insurer of the policy will make restitutions in one way or another in a timely fashion. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was at fault and that party's insurance covers the damages.
But since determining who is financially accountable for services or repairs is regularly a time-consuming affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies often opt to pay up front and assign blame after the fact. They then need a mechanism to regain the costs if, ultimately, they weren't in charge of the payout.
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 policy should have paid for the repair of your auto. How does your insurance company get its funds back?
How Subrogation Works
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 person or property. But under subrogation law, your insurance company is given 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 Policyholders?
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 lost some money too – to be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recover its expenses by ballooning your premiums. On the other hand, if it has a capable legal team and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full $1,000 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.
In addition, if the total loss of an accident is over 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 criminal lawyer Hillsboro, OR, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance companies are not created equal. When comparing, it's worth looking at the records of competing firms to determine whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their policyholders apprised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.