Subrogation is a term that's understood in insurance and legal circles but often not by the policyholders they represent. Even if it sounds complicated, it is to your advantage to understand the nuances of the process. The more information you have about it, the more likely an insurance lawsuit will work out favorably.
Any insurance policy you have is a promise that, if something bad occurs, the insurer of the policy will make good without unreasonable delay. If your real estate burns down, for instance, your property insurance agrees to pay you or enable the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is sometimes a heavily involved affair – and time spent waiting sometimes compounds the damage to the victim – insurance companies in many cases decide to pay up front and assign blame later. They then need a mechanism to recover the costs if, when all the facts are laid out, they weren't in charge of the expense.
For Example
You are in a highway accident. Another car ran into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was entirely to blame and her insurance should have paid for the repair of your car. How does your insurance company get its funds back?
How Subrogation Works
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 insurance firms have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Normally, 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 making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For one thing, if you have a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to get back its losses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after them efficiently, 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 culpable), you'll typically get half your deductible back, depending on your state laws.
Additionally, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as personal injury lawyer Tacoma WA, pursue subrogation and succeeds, it will recover your expenses in addition to its own.
All insurance agencies are not created equal. When comparing, it's worth scrutinizing the records of competing agencies to find out whether they pursue legitimate subrogation claims; if they resolve those claims without delay; if they keep their accountholders advised as the case continues; 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 insurer has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.