Subrogation and How It Affects Policyholders

Subrogation is a term that's understood in insurance and legal circles but rarely by the customers who hire them. Even if it sounds complicated, it would be to your advantage to comprehend an overview of how it works. The more information you have, the more likely it is that an insurance lawsuit will work out in your favor.

Every insurance policy you hold is a promise that, if something bad happens to you, the insurer of the policy will make restitutions in a timely fashion. If your vehicle is in a fender-bender, insurance adjusters (and police, when necessary) determine who was at fault and that party's insurance covers the damages.

But since figuring out who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting often compounds the damage to the victim – insurance firms in many cases opt to pay up front and figure out the blame later. They then need a way to recover the costs if, when all the facts are laid out, they weren't actually responsible for the expense.

Can You Give an Example?

You go to the hospital with a sliced-open finger. You hand the receptionist your medical insurance card and she records your coverage information. You get taken care of and your insurance company is billed for the medical care. But the next morning, when you get to your workplace – where the accident occurred – your boss hands you workers compensation forms to turn in. Your employer's workers comp policy is in fact responsible for the expenses, not your medical insurance. It has a vested interest in getting that money back in some way.

How Does Subrogation Work?

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 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 self or property. But under subrogation law, your insurance company 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 Me?

For one thing, if you have a deductible, it wasn't just your insurance company who 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 timid on any subrogation case it might not win, it might opt to recover its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed 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 50 percent to blame), you'll typically get $500 back, depending on your state laws.

Moreover, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as car accident attorney Smyrna GA, pursue subrogation and wins, it will recover your costs in addition to its own.

All insurers are not created equal. When shopping around, it's worth looking at the reputations of competing firms to determine whether they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders 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, on the other hand, an insurance firm has a reputation of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, even attractive rates won't outweigh the eventual headache.