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Subrogation is a term that's well-known among insurance and legal companies but sometimes not by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your benefit to comprehend the nuances of the process. The more you know, the better decisions you can make about your insurance policy.

Every insurance policy you have is a commitment that, if something bad happens to you, the firm on the other end of the policy will make restitutions without unreasonable delay. If you get an injury at work, your employer's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.

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

Let's Look at an Example

Your garage catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays for the repairs. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the loss. You already have your money, but your insurance company is out $10,000. What does the company do next?

How Subrogation Works

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. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given 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 Does This Matter to Me?

For a start, if you have a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its expenses by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is acting both in its own interests and in yours. If all of the money 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 culpable), you'll typically get $500 back, depending on your state laws.

In addition, if the total expense 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 Personal injury attorney near me Sumner WA, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurance companies are not created equal. When shopping around, it's worth researching the records of competing agencies to determine if they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their customers informed as the case continues; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, on the other hand, an insurance firm has a record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, you should keep looking.