Subrogation is a term that's understood in legal and insurance circles but sometimes not by the customers who hire them. Even if you've never heard the word before, it would be in your benefit to understand the steps of the process. The more you know, the more likely an insurance lawsuit will work out in your favor.

Every insurance policy you have is a promise that, if something bad happens to you, the company on the other end of the policy will make good in a timely manner. If you get an injury on the job, for instance, your company's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.

But since ascertaining who is financially responsible for services or repairs is typically a time-consuming affair – and delay sometimes increases the damage to the policyholder – insurance companies often decide to pay up front and assign blame afterward. They then need a way to get back the costs if, ultimately, they weren't in charge of the expense.

Let's Look at an Example

You are in a car accident. Another car collided with yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was at fault and his insurance policy should have paid for the repair of your vehicle. How does your company get its funds back?

How Subrogation Works

This is where subrogation comes in. It is the way 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. Normally, only you can sue for damages to your self or property. But under subrogation law, your insurer 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.

Why Does This Matter to Me?

For a start, if you have a deductible, it wasn't just your insurer that 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 timid on any subrogation case it might not win, it might opt to recoup its losses by raising your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues those cases aggressively, 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 one-half accountable), you'll typically get $500 back, depending on the laws in your state.

Additionally, if the total cost 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 workers comp attorney Duluth, pursue subrogation and succeeds, it will recover your losses as well as its own.

All insurers are not the same. When shopping around, it's worth scrutinizing the reputations of competing firms to find out whether they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders advised as the case continues; 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 record of paying out claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.