Subrogation is a concept that's understood in insurance and legal circles but rarely by the people who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to know an overview of the process. The more you know about it, the better decisions you can make with regard to your insurance policy.
An insurance policy you hold is an assurance that, if something bad occurs, the company that insures the policy will make good in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) determine who was to blame and that person's insurance covers the damages.
But since determining who is financially accountable for services or repairs is often a time-consuming affair – and time spent waiting often adds to the damage to the policyholder – insurance firms often opt to pay up front and assign blame later. They then need a means to recover the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
Let's Look at an Example
You are in a highway accident. Another car crashed into yours. Police are called, you exchange insurance information, 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 his insurance policy should have paid for the repair of your car. 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 after it has paid for something that should have been paid by some other entity. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is extended some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Individuals?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company 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 recover its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues 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 responsible), you'll typically get $500 back, based on the laws in most states.
In addition, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workmen's compensation Columbus, ga, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurance companies are not the same. When comparing, it's worth looking at the records of competing companies to determine if they pursue valid subrogation claims; if they do so without dragging their feet; if they keep their policyholders updated as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurance company has a record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, you'll feel the sting later.