Subrogation is an idea that's well-known in legal and insurance circles but rarely by the policyholders who employ them. Even if it sounds complicated, it would be to your advantage to understand an overview of how it works. The more information you have, the more likely relevant proceedings will work out favorably.

An insurance policy you hold is a promise that, if something bad happens to you, the business on the other end of the policy will make good without unreasonable delay. If you get injured on the job, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially responsible for services or repairs is usually a confusing affair – and time spent waiting in some cases increases the damage to the policyholder – insurance firms in many cases opt to pay up front and assign blame afterward. They then need a mechanism to get back the costs if, once the situation is fully assessed, they weren't actually responsible for the payout.

Let's Look at an Example

You are in a vehicle accident. Another car crashed into 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 at fault and his insurance policy should have paid for the repair of your vehicle. How does your company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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 to your person or property. But under subrogation law, your insurer 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 the Insured?

For a start, if your insurance policy stipulated a deductible, your insurer 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 timid on any subrogation case it might not win, it might choose to recover its costs by ballooning your premiums and call it a day. On the other hand, if it has a competent legal team and pursues those cases aggressively, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full thousand-dollar 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, based on the laws in most states.

Additionally, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as attorney 95037, successfully press a subrogation case, it will recover your costs as well as its own.

All insurers are not created equal. When shopping around, it's worth looking up the records of competing firms to determine whether they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their accountholders informed as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.