Subrogation is a term that's understood among insurance and legal companies but rarely by the policyholders they represent. Rather than leave it to the professionals, it would be in your self-interest to comprehend the nuances 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 company on the other end of the policy will make restitutions without unreasonable delay. If you get hurt while working, for example, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially accountable for services or repairs is typically a confusing affair – and delay often adds to the damage to the policyholder – insurance firms usually decide to pay up front and figure out the blame later. They then need a mechanism to regain the costs if, once the situation is fully assessed, they weren't responsible for the payout.

For Example

You are in an auto accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was at fault and his insurance 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 process that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given 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 Does This Matter to Me?

For starters, if your insurance policy stipulated 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 – namely, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recoup its losses by raising your premiums. On the other hand, if it has a capable legal team and pursues them enthusiastically, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get half your deductible back, based on the laws in most states.

In addition, if the total expense of an accident is more than 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 real estate law Lake Geneva, WI, 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 researching the reputations of competing agencies to determine if they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders informed as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, instead, an insurance firm has a record of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.