Subrogation is a concept that's well-known in legal and insurance circles but sometimes not by the customers who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to comprehend an overview of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
Any insurance policy you hold is a commitment that, if something bad occurs, the business that covers the policy will make good in one way or another in a timely manner. If a blizzard damages your real estate, for instance, your property insurance agrees to compensate you or facilitate the repairs, subject to state property damage laws.
But since figuring out who is financially accountable for services or repairs is often a tedious, lengthy affair – and delay often increases the damage to the victim – insurance firms usually decide to pay up front and assign blame later. They then need a means to recover the costs if, ultimately, they weren't actually responsible for the expense.
You arrive at the emergency room with a sliced-open finger. You hand the receptionist your medical insurance card and she records your coverage details. You get taken care of and your insurer gets an invoice for the expenses. But on the following afternoon, when you arrive at your workplace – where the injury happened – your boss hands you workers compensation forms to turn in. Your company's workers comp policy is in fact responsible for the costs, not your medical insurance. The latter has a right to recover its costs somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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 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 a start, 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 timid on any subrogation case it might not win, it might choose to recoup its costs by raising your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full 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 your state laws.
In addition, if the total expense of an accident is over 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 trusts and estates law Racine WI, successfully press a subrogation case, it will recover your losses as well as its own.
All insurers are not the same. When shopping around, it's worth scrutinizing the reputations of competing companies to find out if they pursue valid subrogation claims; if they do so quickly; if they keep their policyholders informed as the case goes on; and if they then process successfully won reimbursements right away so that you can get your deductible 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 safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.