Subrogation is a concept that's well-known among insurance and legal professionals but sometimes not by the policyholders who hire them. 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 steps of the process. The more knowledgeable you are, the more likely it is that an insurance lawsuit will work out in your favor.

Any insurance policy you hold is an assurance that, if something bad occurs, the company on the other end of the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) determine who was to blame and that party's insurance pays out.

But since determining who is financially responsible for services or repairs is often a heavily involved affair – and delay sometimes increases the damage to the policyholder – insurance firms in many cases opt to pay up front and figure out the blame afterward. They then need a means to regain the costs if, ultimately, they weren't responsible for the payout.

Let's Look at an Example

You rush into the doctor's office with a deeply cut finger. You give the receptionist your health insurance card and he records your plan information. You get stitched up and your insurer is billed for the medical care. But on the following morning, when you clock in at your place of employment – where the injury occurred – you are given workers compensation paperwork to file. Your workers comp policy is in fact responsible for the payout, not your health insurance policy. It has a vested interest in getting that money back somehow.

How Does Subrogation Work?

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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended 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.

How Does This Affect Policyholders?

For a start, if your insurance policy stipulated a deductible, your insurer wasn't the only one who 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 lax about bringing subrogation cases to court, it might choose to recover its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is doing you a favor as well as itself. 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 half your deductible back, based on the laws in most states.

In addition, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as criminal defense law firm Spanish Fork UT, successfully press a subrogation case, it will recover your losses as well as its own.

All insurance agencies are not created equal. When comparing, it's worth scrutinizing the reputations of competing firms to determine whether they pursue winnable subrogation claims; if they do so with some expediency; if they keep their customers posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then protecting its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.