Subrogation is an idea that's understood among legal and insurance professionals but rarely by the people who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to know an overview of how it works. The more information you have about it, the better decisions you can make about your insurance company.
Every insurance policy you hold is an assurance that, if something bad happens to you, the business on the other end of the policy will make good in one way or another in a timely fashion. If your real estate burns down, for example, your property insurance steps in to remunerate you or facilitate the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is usually a heavily involved affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies in many cases decide to pay up front and assign blame later. They then need a way to recoup the costs if, when all is said and done, they weren't responsible for the expense.
You head to the doctor's office with a gouged finger. You hand the nurse your health insurance card and she writes down your plan details. You get taken care of and your insurance company gets a bill for the tab. But on the following morning, when you clock in at work – where the accident occurred – you are given workers compensation paperwork to turn in. Your employer's workers comp policy is in fact responsible for the invoice, not your health insurance policy. The latter has a right to recover its money somehow.
How Subrogation Works
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 given some of your rights in exchange for making good on the damages. It can go after the money that was originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For one thing, if you have 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 – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recoup its costs by raising your premiums. On the other hand, if it knows which cases it is owed and pursues them aggressively, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get half your deductible back, depending on the laws in your state.
In addition, if the total loss 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 Perry Hall MD, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurers are not the same. When shopping around, it's worth examining the reputations of competing agencies to determine if they pursue valid subrogation claims; if they do so without dragging their feet; if they keep their clients advised as the case goes on; 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 insurer has a reputation of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.