Subrogation is a term that's understood among legal and insurance firms but often not by the customers who employ them. Rather than leave it to the professionals, it would be in your benefit to comprehend the steps of how it works. The more information you have about it, the better decisions you can make with regard to your insurance company.
Every insurance policy you hold is a promise that, if something bad occurs, the insurer of the policy will make good without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) determine who was at fault and that person's insurance covers the damages.
But since determining who is financially accountable for services or repairs is often a time-consuming affair – and time spent waiting often compounds the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame afterward. They then need a method to recoup the costs if, when all the facts are laid out, they weren't in charge of the expense.
Let's Look at an Example
You are in an auto accident. Another car collided with yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was at fault and his insurance should have paid for the repair of your auto. How does your company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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 to your person or property. But under subrogation law, your insurance company 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 your insurance policy stipulated a deductible, your insurance company wasn't the only one 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 unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its expenses by boosting your premiums and call it a day. On the other hand, if it has a competent legal team 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 to blame), you'll typically get $500 back, depending on your state laws.
Additionally, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as workers compensation Duluth, successfully press a subrogation case, it will recover your losses as well as its own.
All insurers are not created equal. When comparing, it's worth examining the reputations of competing agencies to determine if they pursue legitimate subrogation claims; if they do so fast; if they keep their customers apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, on the other hand, an insurance firm has a record of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.