Subrogation is a term that's understood among insurance and legal companies but rarely by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to understand the nuances of how it works. The more information you have, the better decisions you can make about your insurance company.
An insurance policy you have is a commitment that, if something bad happens to you, the company that insures the policy will make good without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) determine who was to blame and that person's insurance pays out.
But since determining who is financially responsible for services or repairs is sometimes a confusing affair – and time spent waiting often compounds the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame afterward. They then need a mechanism to regain the costs if, when there is time to look at all the facts, they weren't in charge of the payout.
Let's Look at an Example
You are in a traffic-light accident. Another car collided with yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was to blame and her insurance should have paid for the repair of your auto. How does your company get its funds back?
How Subrogation Works
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 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 to your self or property. But under subrogation law, your insurance company is given 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.
How Does This Affect Me?
For starters, if you have a deductible, it wasn't just your insurance company 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 unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by boosting your premiums. On the other hand, if it has a proficient legal team and pursues them aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get half your deductible back, based on the laws in most states.
In addition, 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 spendy. If your insurance company or its property damage lawyers, such as fathers rights attorney Boulder City nv, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not created equal. When comparing, it's worth comparing the reputations of competing agencies to evaluate if they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders apprised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurance company has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.