Subrogation is a concept that's understood in insurance and legal circles but rarely by the policyholders who employ them. Even if you've never heard the word before, it would be to your advantage to comprehend an overview of the process. The more information you have about it, the better decisions you can make about your insurance company.
An insurance policy you hold is a promise that, if something bad occurs, the firm that insures the policy will make good without unreasonable delay. If you get an injury while you're on the clock, for instance, your employer'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 accountable for services or repairs is regularly a heavily involved affair – and delay in some cases compounds the damage to the policyholder – insurance companies usually decide to pay up front and figure out the blame later. They then need a method to regain the costs if, ultimately, they weren't actually responsible for the payout.
You rush into the hospital with a deeply cut finger. You give the receptionist your health insurance card and she records your coverage details. You get stitches and your insurer gets an invoice for the medical care. But the next day, when you get to your workplace – where the injury happened – your boss hands you workers compensation paperwork to file. Your workers comp policy is in fact responsible for the bill, not your health insurance. The latter has a right to recover its costs somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the method 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurer is considered to have some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its costs by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all 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 $500 back, based on the laws in most states.
Moreover, if the total expense 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 real estate law Lake Geneva, WI, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurance companies are not the same. When comparing, it's worth examining the records of competing agencies to determine whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their customers advised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurance agency has a reputation of paying out claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you should keep looking.