Subrogation is a term that's well-known among insurance and legal firms but sometimes not by the people they represent. Even if you've never heard the word before, it would be to your advantage to know an overview of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
Every insurance policy you own is an assurance that, if something bad happens to you, the business that insures the policy will make good in one way or another in a timely fashion. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that person's insurance covers the damages.
But since figuring out who is financially responsible for services or repairs is often a heavily involved affair – and delay sometimes increases the damage to the policyholder – insurance companies usually opt to pay up front and figure out the blame after the fact. They then need a way to recoup the costs if, once the situation is fully assessed, they weren't in charge of the payout.
You are in a car accident. Another car crashed into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was to blame and his insurance should have paid for the repair of your auto. How does your insurance company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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 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 that was originally due to you, because it has covered the amount already.
How Does This Affect the Insured?
For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one who 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 unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs by increasing your premiums and call it a day. On the other hand, if it has a competent legal team and goes after them aggressively, it is doing you a favor as well as itself. 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 $500 back, depending on your state laws.
Furthermore, if the total expense of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as criminal defense attorney Portland OR, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurers are not the same. When comparing, it's worth comparing the reputations of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their policyholders updated as the case continues; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.