Subrogation is an idea that's well-known among insurance and legal professionals but sometimes not by the policyholders they represent. Rather than leave it to the professionals, it is in your benefit to understand an overview of how it works. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance company.
An insurance policy you own is a commitment that, if something bad happens to you, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If your house burns down, your property insurance agrees to pay you or facilitate the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is usually a heavily involved affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance firms usually opt to pay up front and assign blame after the fact. They then need a path to regain the costs if, when all the facts are laid out, they weren't actually in charge of the payout.
For Example
You head to the doctor's office with a gouged finger. You give the nurse your health insurance card and he writes down your policy details. You get taken care of and your insurer gets a bill for the services. But on the following day, when you clock in at work – where the accident happened – you are given workers compensation paperwork to turn in. Your employer's workers comp policy is actually responsible for the expenses, not your health insurance. The latter has a right to recover its money somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurer is considered to have some of your rights 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, it wasn't just your insurer who 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 insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its losses by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as personal injury law morgan hill ca, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not the same. When comparing, it's worth examining the reputations of competing companies to find out whether they pursue valid subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders advised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then protecting its profit margin by raising your premiums, you should keep looking.