Subrogation and How It Affects Policyholders

Subrogation is an idea that's well-known in legal and insurance circles but often not by the policyholders who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to know the nuances of the process. The more information you have, the more likely an insurance lawsuit will work out in your favor.

Any insurance policy you own is an assurance that, if something bad occurs, the business on the other end of the policy will make good without unreasonable delay. If a windstorm damages your property, your property insurance agrees to repay you or facilitate the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is often a tedious, lengthy affair – and time spent waiting sometimes increases the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame after the fact. They then need a path to recoup the costs if, when all the facts are laid out, they weren't responsible for the payout.

Can You Give an Example?

You go to the hospital with a deeply cut finger. You hand the nurse your health insurance card and he writes down your plan information. You get taken care of and your insurance company gets a bill for the medical care. But on the following afternoon, when you clock in at work – where the injury happened – your boss hands you workers compensation forms to file. Your employer's workers comp policy is actually responsible for the bill, not your health insurance. The latter has a right to recover its money in some way.

How Does Subrogation Work?

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. Usually, 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 making good on 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 Policyholders?

For a start, 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 be precise, $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 boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is doing you a favor as well as itself. If all 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 half your deductible back, depending on the laws in your state.

Moreover, 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 personal injury lawyer Sumner WA, successfully press a subrogation case, it will recover your losses as well as its own.

All insurance agencies are not the same. When shopping around, it's worth researching the reputations of competing agencies to determine whether they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their clients apprised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, instead, an insurance company has a record of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, you should keep looking.