Subrogation is a term that's understood in legal and insurance circles but sometimes not by the policyholders who employ them. Even if you've never heard the word before, it is to your advantage to understand the nuances of the process. The more information you have about it, the better decisions you can make about your insurance policy.
An insurance policy you hold is an assurance that, if something bad happens to you, the insurer of the policy will make good in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was to blame and that party's insurance covers the damages.
But since ascertaining who is financially accountable for services or repairs is sometimes a tedious, lengthy affair – and delay in some cases adds to the damage to the victim – insurance firms often decide to pay up front and assign blame after the fact. They then need a mechanism to regain the costs if, when all is said and done, they weren't actually in charge of the payout.
For Example
You go to the doctor's office with a sliced-open finger. You give the nurse your health insurance card and she writes down your coverage details. You get stitched up and your insurer gets an invoice for the medical care. But the next morning, when you clock in at your workplace – where the accident happened – your boss hands you workers compensation paperwork to file. Your company's workers comp policy is actually responsible for the bill, not your health insurance policy. It has a vested interest in getting that money back in some way.
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 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.
How Does This Affect Policyholders?
For one thing, if your insurance policy stipulated a deductible, your insurer 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 be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its losses by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after 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, depending on the laws in your state.
Moreover, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as law firm vancouver wa, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurers are not created equal. When comparing, it's worth looking at the reputations of competing firms to evaluate if they pursue winnable subrogation claims; if they do so in a reasonable amount of time; if they keep their customers informed 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 record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, you should keep looking.
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