Subrogation is a concept that's well-known in insurance and legal circles but often not by the customers they represent. Even if you've never heard the word before, it would be to your advantage to understand an overview of the process. The more you know, the more likely an insurance lawsuit will work out favorably.

Every insurance policy you hold is a commitment that, if something bad happens to you, the insurer of the policy will make restitutions without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) decide who was at fault and that person's insurance pays out.

But since figuring out who is financially responsible for services or repairs is sometimes a time-consuming affair – and delay in some cases increases the damage to the policyholder – insurance companies usually opt to pay up front and figure out the blame afterward. They then need a mechanism to recover the costs if, ultimately, they weren't in charge of the payout.

Let's Look at an Example

Your living room catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays out your claim in full. 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 liable for the damages. The house has already been fixed up in the name of expediency, but your insurance agency is out $10,000. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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 extended 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 your insurance policy stipulated a deductible, it wasn't just your insurance company that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recoup its costs by raising your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues them efficiently, it is doing you a favor as well as itself. 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 one-half 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 could be in for a stiff bill. If your insurance company or its property damage lawyers, such as family law firm Vancouver WA, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurance companies are not created equal. When shopping around, it's worth contrasting the records of competing firms to determine whether they pursue winnable subrogation claims; if they do so in a reasonable amount of time; if they keep their accountholders advised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.