Subrogation and How It Affects Your Insurance Policy

Subrogation is a term that's understood in insurance and legal circles but often not by the people who hire them. Even if you've never heard the word before, it would be in your self-interest to comprehend the nuances of how it works. The more information you have, the better decisions you can make with regard to your insurance policy.

An insurance policy you hold is an assurance that, if something bad happens to you, the company on the other end of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was to blame and that party's insurance covers the damages.

But since figuring out who is financially responsible for services or repairs is regularly a heavily involved affair – and time spent waiting in some cases increases the damage to the victim – insurance firms often decide to pay up front and assign blame afterward. They then need a path to recoup the costs if, when there is time to look at all the facts, they weren't actually responsible for the expense.

Let's Look at an Example

You arrive at the doctor's office with a sliced-open finger. You give the receptionist your health insurance card and he writes down your coverage details. You get stitched up and your insurance company is billed for the medical care. But the next day, when you arrive at your place of employment – where the accident occurred – you are given workers compensation forms to turn in. Your employer's workers comp policy is in fact responsible for the hospital visit, not your health insurance company. It has a vested interest in getting that money back somehow.

How Subrogation Works

This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. Some companies 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 self or property. But under subrogation law, your insurance company is given 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 a start, if your insurance policy stipulated 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 lost some money too – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to get back its expenses by raising your premiums. 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 of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get half your deductible back, based on the laws in most states.

Furthermore, 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 auto accident attorney Rosedale MD, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurers are not created equal. When shopping around, it's worth looking at the records of competing companies to find out whether they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their customers informed as the case continues; 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, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.