Subrogation and How It Affects Policyholders

Subrogation is a concept that's understood in legal and insurance circles but often not by the policyholders who hire them. Even if you've never heard the word before, it is to your advantage to comprehend the nuances of how it works. The more information you have about it, the more likely it is that relevant proceedings will work out in your favor.

An insurance policy you own is a promise that, if something bad occurs, the business on the other end of the policy will make good without unreasonable delay. If you get an injury while you're on the clock, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since ascertaining who is financially accountable for services or repairs is sometimes a confusing affair – and time spent waiting in some cases adds to the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame afterward. They then need a means to recoup the costs if, once the situation is fully assessed, they weren't responsible for the expense.

For Example

You are in a car accident. Another car ran 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 police tell the insurance companies that the other driver was 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 way that an insurance company uses to claim reimbursement 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 insurer is considered to have some of your rights in exchange 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 one thing, if your insurance policy stipulated a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company 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 pursues those cases efficiently, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full 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.

In addition, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as real estate lawyer Williams Bay, WI, pursue subrogation and wins, it will recover your expenses as well as its own.

All insurance agencies are not the same. When comparing, it's worth measuring the reputations of competing companies to determine if they pursue winnable subrogation claims; if they resolve those claims without delay; if they keep their clients apprised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance agency has a record of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.