Subrogation is a concept that's understood among insurance and legal professionals but rarely by the customers who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand the steps of how it works. The more knowledgeable you are about it, the more likely an insurance lawsuit will work out in your favor.

An insurance policy you hold is a promise that, if something bad happens to you, the insurer of the policy will make restitutions without unreasonable delay. If you get hurt while working, your company's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially accountable for services or repairs is usually a confusing affair – and delay often adds to the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a path to regain the costs if, when all the facts are laid out, they weren't actually in charge of the payout.

For Example

Your bedroom catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the loss. The house has already been repaired in the name of expediency, but your insurance agency is out $10,000. What does the agency do next?

How Subrogation Works

This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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 person or property. But under subrogation law, your insurer is considered to have some of your rights in exchange for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.

Why Do I Need to Know This?

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 lost some money too – to be precise, $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to recoup its losses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, based on the laws in most states.

Additionally, if the total cost of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as criminal defense law firm Springville UT, pursue subrogation and wins, it will recover your losses in addition to its own.

All insurance agencies are not created equal. When shopping around, it's worth contrasting the records of competing firms to find out whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their customers apprised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, instead, an insurance firm has a record of paying out claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you should keep looking.