Subrogation is a term that's understood in insurance and legal circles but often not by the people they represent. Even if you've never heard the word before, it would be in your self-interest to know the nuances of how it works. The more information you have about it, the more likely an insurance lawsuit will work out favorably.

Any insurance policy you own is a commitment that, if something bad happens to you, the insurer of the policy will make restitutions without unreasonable delay. If you get an injury on the job, your employer's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially accountable for services or repairs is usually a time-consuming affair – and delay often compounds the damage to the victim – insurance companies often decide to pay up front and assign blame later. They then need a means to regain the costs if, when all the facts are laid out, they weren't actually in charge of the expense.

Can You Give an Example?

You are in a vehicle accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was entirely to blame and his insurance policy should have paid for the repair of your auto. How does your company get its money back?

How Subrogation Works

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

How Does This Affect Individuals?

For starters, if your insurance policy stipulated 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 – to the tune of $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to get back its costs by ballooning your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workmans comp Dunwoody, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurers are not the same. When shopping around, it's worth examining the records of competing firms to evaluate whether they pursue valid subrogation claims; if they do so without delay; if they keep their accountholders 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 safeguarding its bottom line by raising your premiums, you'll feel the sting later.