Subrogation is a term that's understood in legal and insurance circles but often not by the customers they represent. Even if you've never heard the word before, it would be in your benefit to know the steps of the process. The more information you have about it, the more likely an insurance lawsuit will work out in your favor.

Any insurance policy you have is a commitment that, if something bad happens to you, the business on the other end of the policy will make good without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance covers the damages.

But since ascertaining who is financially accountable for services or repairs is typically a heavily involved affair – and time spent waiting often increases the damage to the victim – insurance companies usually decide to pay up front and figure out the blame later. They then need a mechanism to recover the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.

Can You Give an Example?

You are in a highway 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 police tell the insurance companies that the other driver was entirely at fault and his insurance should have paid for the repair of your vehicle. How does your company get its money back?

How Subrogation Works

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 companies 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 insurance company is considered to have 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 Individuals?

For one thing, if you have a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to get back its costs by increasing your premiums and call it a day. On the other hand, if it has a capable legal team and goes after 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 $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get half your deductible back, based on the laws in most states.

In addition, if the total cost 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 morgan hill ca, pursue subrogation and wins, it will recover your costs in addition to its own.

All insurers are not created equal. When comparing, it's worth examining the records of competing agencies to evaluate if they pursue winnable subrogation claims; if they do so with some expediency; if they keep their customers apprised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.