Subrogation is a term that's understood in legal and insurance circles but often not by the policyholders they represent. Even if you've never heard the word before, it is in your self-interest to understand the nuances of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
Every insurance policy you hold is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If you get an injury at work, for example, your employer's workers compensation insurance picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and time spent waiting in some cases adds to the damage to the policyholder – insurance companies in many cases decide to pay up front and assign blame after the fact. They then need a path to regain the costs if, when there is time to look at all the facts, they weren't responsible for the expense.
You are in a car accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was at fault and her insurance should have paid for the repair of your auto. How does your insurance company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the process 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurer is extended some of your rights 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 starters, if your insurance policy stipulated 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 be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recover its expenses by ballooning 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 acting both in its own interests and in yours. If all ten grand 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 the laws in your state.
In addition, if the total cost of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as workers comp attorney Alpharetta, pursue subrogation and succeeds, it will recover your expenses in addition to its own.
All insurance companies are not created equal. When comparing, it's worth looking at the reputations of competing firms to evaluate if they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their clients updated as the case goes on; 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 insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you'll feel the sting later.