Subrogation is a term that's well-known in legal and insurance circles but rarely by the people they represent. Even if you've never heard the word before, it would be in your self-interest to comprehend an overview of how it works. The more information you have, the more likely it is that relevant proceedings will work out favorably.
Every insurance policy you have is an assurance that, if something bad happens to you, the insurer of the policy will make good in one way or another in a timely manner. If your vehicle is hit, insurance adjusters (and the courts, when necessary) determine who was to blame and that party's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is often a heavily involved affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance companies often decide to pay up front and figure out the blame after the fact. They then need a mechanism to recoup the costs if, when all the facts are laid out, they weren't in charge of the expense.
Can You Give an Example?
You are in a car accident. Another car crashed into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was entirely to blame and his insurance should have paid for the repair of your vehicle. How does your insurance company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the method 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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended some of your rights 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.
How Does This Affect Policyholders?
For one thing, 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 the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs by boosting your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues them aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full 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, based on the laws in most states.
In addition, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as personal injury attorney Powder Springs GA, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth looking up the records of competing companies to find out whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their accountholders advised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your deductible 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, you should keep looking.