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Subrogation and How It Affects Policyholders

  • 6 11, 2019
  • |Law
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Subrogation is a term that's well-known in insurance and legal circles but often not by the people who employ them. Rather than leave it to the professionals, it is in your self-interest to understand the nuances of the process. The more knowledgeable you are, the more likely it is that an insurance lawsuit will work out favorably.

Every insurance policy you have is an assurance that, if something bad occurs, the company on the other end of the policy will make good in a timely fashion. If a blizzard damages your property, for instance, your property insurance steps in to compensate you or enable the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting in some cases compounds the damage to the victim – insurance firms often opt to pay up front and figure out the blame after the fact. They then need a mechanism to regain the costs if, when all the facts are laid out, they weren't in charge of the payout.

For Example

You arrive at the hospital with a deeply cut finger. You give the nurse your medical insurance card and she records your coverage information. You get stitched up and your insurance company is billed for the expenses. But the next afternoon, when you clock in at your place of employment – where the accident happened – your boss hands you workers compensation forms to fill out. Your employer's workers comp policy is in fact responsible for the invoice, not your medical insurance company. The latter has a right to recover its costs somehow.

How Subrogation Works

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 person or property. But under subrogation law, your insurance company is given 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 the Insured?

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 have a stake in the outcome as well – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to get back its costs by ballooning your premiums. On the other hand, if it has a capable legal team and goes after them enthusiastically, it is acting both in its own interests and in yours. If all 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 at fault), you'll typically get $500 back, depending on the laws in your state.

Moreover, if the total price of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as criminal defense attorney Hillsboro OR, pursue subrogation and succeeds, it will recover your expenses as well as its own.

All insurers are not the same. When shopping around, it's worth examining the records of competing firms to find out whether they pursue winnable subrogation claims; if they do so fast; if they keep their customers updated 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 reputation of paying out claims that aren't its responsibility and then protecting its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.