Subrogation is a concept that's understood in legal and insurance circles but sometimes not by the customers 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 an overview of how it works. The more information you have, the better decisions you can make about your insurance company.

An insurance policy you have is a commitment that, if something bad happens to you, the insurer of the policy will make good in one way or another without unreasonable delay. If you get an injury at work, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and time spent waiting in some cases adds to the damage to the victim – insurance firms usually decide to pay up front and figure out the blame later. They then need a means to recover the costs if, ultimately, they weren't in charge of the expense.

For Example

You head to the emergency room with a sliced-open finger. You give the nurse your health insurance card and she writes down your coverage details. You get stitched up and your insurance company is billed for the expenses. But on the following afternoon, when you get to work – where the accident happened – your boss hands you workers compensation forms to file. Your employer's workers comp policy is actually responsible for the expenses, not your health insurance. It has a vested interest in getting that money back in some way.

How Subrogation Works

This is where subrogation comes in. It is the method 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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.

How Does This Affect Me?

For a start, if you have a deductible, it wasn't just your insurance company 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 unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its costs by boosting your premiums. On the other hand, if it has a capable legal team and pursues them efficiently, 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 to blame), you'll typically get half your deductible back, depending on the laws in your state.

Furthermore, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as criminal defense attorney Portland OR, pursue subrogation and succeeds, it will recover your losses in addition to its own.

All insurance agencies are not created equal. When comparing, it's worth measuring the reputations of competing agencies to determine whether they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their accountholders posted as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurance firm has a record of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.