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Subrogation is a concept that's understood among legal and insurance professionals but rarely by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to know the steps of the process. The more information you have about it, the more likely it is that relevant proceedings will work out favorably.

Any insurance policy you have is an assurance that, if something bad happens to you, the insurer of the policy will make good in a timely manner. If your real estate suffers fire damage, for example, your property insurance steps in to pay you or enable the repairs, subject to state property damage laws.

But since figuring out who is financially accountable for services or repairs is typically a confusing affair – and delay in some cases adds to the damage to the policyholder – insurance firms often opt to pay up front and assign blame later. They then need a path to recoup the costs if, when all is said and done, they weren't actually in charge of the expense.

For Example

You rush into the emergency room with a deeply cut finger. You give the nurse your health insurance card and he writes down your plan details. You get stitched up and your insurer gets a bill for the medical care. But the next morning, when you arrive at work – where the accident occurred – your boss hands you workers compensation forms to file. Your employer's workers comp policy is actually responsible for the hospital trip, not your health insurance company. It has a vested interest in getting that money back somehow.

How Does Subrogation Work?

This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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. Under ordinary circumstances, 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 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 a start, if your insurance policy stipulated 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its costs by ballooning your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and goes after them enthusiastically, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get $500 back, depending on your state laws.

Additionally, if the total loss of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as personal injury attorney Sumner WA, pursue subrogation and wins, it will recover your expenses in addition to its own.

All insurance companies are not the same. When comparing, it's worth examining the records of competing firms to evaluate whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their policyholders informed as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, on the other hand, an insurance firm has a record 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.