Subrogation and How It Affects Your Insurance Policy

Subrogation is a term that's understood among insurance and legal professionals but often not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to comprehend an overview of the process. The more you know about it, the better decisions you can make with regard to your insurance company.

Any insurance policy you have is a commitment that, if something bad happens to you, the company on the other end of the policy will make restitutions in one way or another in a timely fashion. If you get injured on the job, for instance, your employer's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially accountable for services or repairs is sometimes a confusing affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance firms in many cases opt to pay up front and figure out the blame after the fact. They then need a method to regain the costs if, in the end, they weren't actually responsible for the expense.

Let's Look at an Example

You rush into the doctor's office with a gouged finger. You give the nurse your medical insurance card and he records your plan details. You get taken care of and your insurer gets a bill for the tab. But on the following morning, when you get to your workplace – where the accident happened – you are given workers compensation paperwork to turn in. Your workers comp policy is actually responsible for the expenses, not your medical insurance company. It has a vested interest in getting that money back somehow.

How Subrogation Works

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 insurance firms have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurer 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.

Why Does This Matter to Me?

For one thing, if you have 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 be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recover its losses by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full thousand-dollar 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, depending on your state laws.

Furthermore, if the total expense 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 auto accident lawyer Middle River MD, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurers are not created equal. When shopping around, it's worth comparing the records of competing firms to evaluate whether they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their clients posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your money 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 profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.