Subrogation is a term that's understood in legal and insurance circles but often not by the policyholders they represent. Even if it sounds complicated, it would be in your benefit to comprehend an overview of how it works. The more you know about it, the more likely an insurance lawsuit will work out in your favor.
Every insurance policy you have is a promise that, if something bad happens to you, the business on the other end of the policy will make restitutions without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and police, when necessary) determine who was at fault and that person's insurance covers the damages.
But since ascertaining who is financially responsible for services or repairs is regularly a confusing affair – and delay in some cases compounds the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame afterward. They then need a means to regain the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.
Let's Look at an Example
You are in an auto accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was at fault and his insurance should have paid for the repair of your auto. How does your company get its money back?
How Does Subrogation Work?
This is where subrogation comes in. It is the way 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 done to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For starters, if you have a deductible, your insurer wasn't the only one that 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 insurer is timid on any subrogation case it might not win, it might choose to get back its expenses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is doing you a favor as well as itself. 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 accountable), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total price 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 criminal lawyer Portland, OR, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurers are not created equal. When comparing, it's worth contrasting the reputations of competing companies to evaluate if they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their accountholders posted as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.