Subrogation is a term that's well-known among insurance and legal companies but rarely by the policyholders who hire them. Even if it sounds complicated, it is in your benefit to understand an overview of how it works. The more information you have about it, the better decisions you can make with regard to your insurance policy.
Any insurance policy you hold is a promise that, if something bad happens to you, the company that covers the policy will make restitutions in one way or another without unreasonable delay. If a hailstorm damages your property, your property insurance steps in to pay you or pay for the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is regularly a confusing affair – and delay sometimes compounds the damage to the policyholder – insurance companies often opt to pay up front and figure out the blame afterward. They then need a path to regain the costs if, ultimately, they weren't in charge of the expense.
For Example
You are in a highway accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was at fault and his insurance should have paid for the repair of your vehicle. How does your 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 reimbursement 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. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given 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 you have a deductible, your insurance company wasn't the only one that 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 insurer is lax about bringing subrogation cases to court, it might choose to recoup its costs by upping your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, 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 50 percent accountable), you'll typically get half your deductible back, depending on your state laws.
Furthermore, 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 expensive. If your insurance company or its property damage lawyers, such as car accident attorney Mableton GA, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurers are not the same. When shopping around, it's worth looking up the reputations of competing firms to determine whether they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their customers apprised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then covering its bottom line by raising your premiums, you'll feel the sting later.