The Things You Need to Know About Subrogation

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.

For Example

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.

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Subrogation and How It Affects You

Subrogation is a term that's understood in legal and insurance circles but rarely by the customers who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to understand an overview of the process. The more information you have, the better decisions you can make with regard to your insurance company.

An insurance policy you own is a promise that, if something bad happens to you, the business on the other end of the policy will make restitutions in one way or another in a timely fashion. If a hailstorm damages your home, your property insurance agrees to repay you or facilitate the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is typically a heavily involved affair – and time spent waiting sometimes increases the damage to the policyholder – insurance firms often decide to pay up front and assign blame afterward. They then need a mechanism to recover the costs if, when all the facts are laid out, they weren't responsible for the expense.

Let's Look at an Example

You arrive at the doctor's office with a sliced-open finger. You give the receptionist your health insurance card and he takes down your policy details. You get stitched up and your insurance company gets an invoice for the services. But the next afternoon, when you arrive at your place of employment – where the injury happened – your boss hands you workers compensation forms to fill out. Your employer's workers comp policy is in fact responsible for the costs, not your health 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 insurance firms 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 to your self or property. But under subrogation law, your insurance company is extended some of your rights for having taken care of 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 Me?

For a start, 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 lost some money too – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to recover its costs by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get $500 back, depending on the laws in your state.

Furthermore, if the total loss 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 workers comp lawyer Duluth, pursue subrogation and succeeds, it will recover your costs in addition to its own.

All insurers are not the same. When shopping around, it's worth researching the reputations of competing firms to evaluate if they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their policyholders posted as the case continues; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, instead, an insurance agency has a reputation of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.

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