Subrogation is an idea that's understood in legal and insurance circles but rarely by the customers they represent. Even if you've never heard the word before, it is in your self-interest to understand the steps of how it works. The more you know, the more likely an insurance lawsuit will work out in your favor.

Every insurance policy you own is an assurance that, if something bad occurs, the insurer of the policy will make good in one way or another without unreasonable delay. If a storm damages your house, for example, your property insurance agrees to pay you or facilitate the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is sometimes a confusing affair – and time spent waiting sometimes increases the damage to the policyholder – insurance companies often decide to pay up front and assign blame after the fact. They then need a method to regain the costs if, when all is said and done, they weren't actually in charge of the expense.

Can You Give an Example?

You rush into the Instacare with a sliced-open finger. You give the nurse your medical insurance card and he writes down your coverage information. You get stitches and your insurer gets an invoice for the expenses. But the next morning, when you clock in at your place of employment – where the injury happened – you are given workers compensation paperwork to turn in. Your company's workers comp policy is actually responsible for the costs, not your medical insurance policy. The latter has an interest in recovering its costs somehow.

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 insurance firms 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 for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Does This Matter to Me?

For one thing, 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 have a stake in the outcome as well – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to get back its costs by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all is recovered, you will get your full 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 the laws in your state.

Moreover, 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 workers comp lawyer Dunwoody, pursue subrogation and wins, it will recover your costs as well as its own.

All insurers are not created equal. When shopping around, it's worth looking at the records of competing firms to determine whether they pursue legitimate subrogation claims; if they resolve those claims without delay; if they keep their policyholders apprised as the case goes on; 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, instead, an insurance agency has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.