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Subrogation and How It Affects Policyholders

  • 8 21, 2018
  • |Law
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Subrogation is a concept that's well-known in insurance and legal circles but often not by the people who hire them. Even if it sounds complicated, it is in your self-interest to understand the steps of the process. The more you know, the more likely it is that relevant proceedings will work out favorably.

Every insurance policy you hold is a commitment that, if something bad occurs, the business that insures the policy will make restitutions without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that party's insurance covers the damages.

But since determining who is financially responsible for services or repairs is typically a heavily involved affair – and delay in some cases increases the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame later. They then need a means to recover the costs if, in the end, they weren't actually responsible for the payout.

For Example

You are in an auto accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was at fault and her insurance policy should have paid for the repair of your vehicle. How does your 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 payment after it has paid for something that should have been paid by some other entity. 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. Usually, only you can sue for damages to your self or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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.

Why Do I Need to Know This?

For starters, if your insurance policy stipulated a deductible, it wasn't just your insurance company who 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 insurance company is lax about bringing subrogation cases to court, it might opt to get back its costs by upping your premiums. On the other hand, if it has a capable legal team and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all ten grand 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 the laws in your state.

Additionally, 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 adoption lawyer delavan wi, pursue subrogation and succeeds, it will recover your losses in addition to its own.

All insurers are not created equal. When shopping around, it's worth scrutinizing the reputations of competing companies to evaluate if they pursue valid subrogation claims; if they do so fast; if they keep their clients updated as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.