Subrogation is a concept that's well-known in legal and insurance circles but sometimes not by the customers they represent. Even if it sounds complicated, it is in your self-interest to comprehend the nuances of the process. The more information you have about it, the better decisions you can make with regard to your insurance policy.
An insurance policy you have is an assurance that, if something bad occurs, the company that covers the policy will make restitutions without unreasonable delay. If you get hurt while working, your company's workers compensation insurance pays out 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 sometimes a time-consuming affair – and time spent waiting sometimes adds to the damage to the victim – insurance companies in many cases decide to pay up front and figure out the blame after the fact. They then need a method to regain the costs if, once the situation is fully assessed, they weren't actually responsible for the expense.
Can You Give an Example?
You rush into the emergency room with a gouged finger. You give the receptionist your medical insurance card and he writes down your plan details. You get stitched up and your insurer is billed for the services. But the next day, when you arrive at work – where the injury occurred – you are given workers compensation paperwork to turn in. Your company's workers comp policy is actually responsible for the payout, not your medical insurance. It has a vested interest in getting that money back somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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 person or property. But under subrogation law, your insurer is considered to have some of your rights in exchange for making good on the damages. It can go after the money that was originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recoup its costs by upping your premiums. On the other hand, if it has a capable legal team and pursues those cases aggressively, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get half your deductible back, depending on the laws in your state.
Furthermore, if the total loss 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 civil law 95037, successfully press a subrogation case, it will recover your costs as well as its own.
All insurers are not created equal. When shopping around, it's worth looking at the reputations of competing agencies to evaluate if they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their customers advised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurance firm has a record of honoring claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.