Subrogation is a term that's understood in legal and insurance circles but rarely by the policyholders they represent. Even if it sounds complicated, it would be in your self-interest to comprehend the nuances of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance policy.
Every insurance policy you hold is a promise that, if something bad occurs, the business that covers the policy will make good in one way or another without unreasonable delay. If a hailstorm damages your property, your property insurance steps in 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 typically a time-consuming affair – and time spent waiting often compounds the damage to the policyholder – insurance firms often opt to pay up front and assign blame later. They then need a mechanism to get back the costs if, when all the facts are laid out, they weren't actually in charge of the payout.
You arrive at the doctor's office with a deeply cut finger. You give the receptionist your health insurance card and she writes down your coverage details. You get stitches and your insurer gets a bill for the expenses. But the next morning, when you get to work – where the injury occurred – you are given workers compensation forms to turn in. Your company's workers comp policy is actually responsible for the expenses, not your health insurance policy. The latter has an interest in recovering its costs somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For starters, if you have a deductible, your insurer wasn't the only one that 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 choose to recoup its expenses by ballooning your premiums. On the other hand, if it has a capable legal team and goes after them enthusiastically, it is acting both in its own interests and in yours. 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.
Furthermore, if the total expense 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 workers comp attorney Alpharetta, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance companies are not the same. When shopping around, it's worth looking up the reputations of competing firms to find out if they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their accountholders apprised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.