Subrogation is a concept that's understood among insurance and legal companies but rarely by the policyholders who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to know an overview of how it works. The more information you have about it, the better decisions you can make with regard to your insurance company.
Every insurance policy you have is a promise that, if something bad occurs, the company on the other end of the policy will make good in a timely fashion. If you get injured 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 determining who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and delay often increases the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a way to get back the costs if, when all is said and done, they weren't responsible for the expense.
Can You Give an Example?
You arrive at the emergency room with a deeply cut finger. You hand the receptionist your medical insurance card and he takes down your coverage information. You get stitched up and your insurer is billed for the medical care. But on the following afternoon, when you get to work – where the injury happened – you are given workers compensation paperwork to file. Your workers comp policy is actually responsible for the payout, not your medical insurance company. 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. Ordinarily, only you can sue for damages 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 originally due to you, because it has covered the amount already.
How Does This Affect Me?
For a start, 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 – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is doing you a favor as well as itself. If all is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get $500 back, depending on the laws in your state.
In addition, if the total price 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 workers comp attorney Duluth, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth comparing the reputations of competing agencies to evaluate whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their policyholders informed as the case proceeds; 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, on the other hand, an insurance agency has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.