Subrogation is a term that's well-known in legal and insurance circles but rarely by the policyholders who hire them. Even if you've never heard the word before, it would be in your benefit to comprehend an overview of the process. The more knowledgeable you are, the better decisions you can make about your insurance company.

An insurance policy you own is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If you get an injury while working, for example, your company's workers compensation insurance picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially responsible for services or repairs is typically a tedious, lengthy affair – and time spent waiting often increases the damage to the policyholder – insurance firms in many cases opt to pay up front and figure out the blame afterward. They then need a path to regain the costs if, when all the facts are laid out, they weren't actually responsible for the expense.

Let's Look at an Example

You go to the doctor's office with a deeply cut finger. You hand the receptionist your health insurance card and he records your coverage information. You get stitched up and your insurer is billed for the expenses. But on the following afternoon, when you arrive at your place of employment – where the accident happened – your boss hands you workers compensation paperwork to turn in. Your workers comp policy is actually responsible for the payout, not your health insurance company. The latter has an interest in recovering its money somehow.

How Does Subrogation Work?

This is where subrogation comes in. It is the method 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurer 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.

Why Should I Care?

For starters, if you have a deductible, it wasn't just your insurer that 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 insurance company is lax about bringing subrogation cases to court, it might choose to get back its expenses by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full $1,000 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 cost of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as Personal injury attorney Tacoma Wa, successfully press a subrogation case, it will recover your losses as well as its own.

All insurance companies are not created equal. When shopping around, it's worth comparing the records of competing companies to determine whether they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, instead, an insurance company has a record of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, you'll feel the sting later.