Subrogation is an idea that's well-known among legal and insurance companies but often not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to understand the nuances of how it works. The more information you have about it, the better decisions you can make with regard to your insurance company.
An insurance policy you hold is a commitment that, if something bad happens to you, the firm on the other end of the policy will make restitutions without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) decide who was at fault and that party's insurance covers the damages.
But since ascertaining who is financially responsible for services or repairs is regularly a confusing affair – and delay often adds to the damage to the victim – insurance firms in many cases decide to pay up front and figure out the blame afterward. They then need a mechanism to get back the costs if, when all is said and done, they weren't in charge of the payout.
You are in a car accident. Another car collided with yours. The police show up to assess the situation, 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 entirely at fault and his insurance should have paid for the repair of your car. How does your insurance company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the method 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. Ordinarily, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is given some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For a start, if you have a deductible, it wasn't just your insurance company that 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its losses by increasing your premiums. On the other hand, if it has a capable legal team and pursues those cases enthusiastically, it is doing you a favor as well as itself. 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 50 percent culpable), you'll typically get $500 back, depending on the laws in your state.
In addition, if the total price 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 personal injury claims Mableton GA, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurance companies are not the same. When comparing, it's worth weighing the reputations of competing companies to evaluate whether they pursue winnable subrogation claims; if they do so quickly; if they keep their customers posted as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurance company has a record of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.