Subrogation is a term that's understood in insurance and legal circles but rarely by the policyholders they represent. Rather than leave it to the professionals, it is in your self-interest to understand the nuances of how it works. The more information you have, the better decisions you can make about your insurance company.
Any insurance policy you hold is a commitment that, if something bad happens to you, the business that covers the policy will make restitutions without unreasonable delay. If you get an injury on the job, for example, your company's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is often a heavily involved affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance companies in many cases decide to pay up front and figure out the blame afterward. They then need a way to recoup the costs if, ultimately, they weren't responsible for the payout.
For Example
You arrive at the doctor's office with a gouged finger. You hand the nurse your health insurance card and she writes down your coverage information. You get stitches and your insurer is billed for the expenses. But the next afternoon, when you clock in at work – where the accident happened – you are given workers compensation forms to turn in. Your employer's workers comp policy is in fact responsible for the costs, not your health insurance company. 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 when it pays out a claim that turned out not to be its responsibility. 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. Normally, only you can sue for damages done to your person 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.
How Does This Affect Policyholders?
For one thing, if you have a deductible, it wasn't just your insurer 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 insurer is lax about bringing subrogation cases to court, it might opt to recoup its costs by ballooning your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues them 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 culpable), you'll typically get half your deductible back, depending on your state laws.
Additionally, if the total expense 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 personal injury attorney near me Bonney Lake WA, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurance companies are not created equal. When shopping around, it's worth contrasting the reputations of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers posted as the case continues; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.