Subrogation is a concept that's understood in legal and insurance circles but often not by the people who hire them. Even if you've never heard the word before, it would be in your benefit to know the nuances of how it works. The more knowledgeable you are, the more likely an insurance lawsuit will work out favorably.

Any insurance policy you own is a promise that, if something bad happens to you, the firm that covers the policy will make restitutions in one way or another without unreasonable delay. If you get an injury on the job, for example, your company's workers compensation pays out 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 heavily involved affair – and delay sometimes increases the damage to the policyholder – insurance firms usually decide to pay up front and figure out the blame after the fact. They then need a path to regain the costs if, when there is time to look at all the facts, they weren't in charge of the payout.

Let's Look at an Example

Your electric outlet catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays out your claim in full. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the loss. You already have your money, but your insurance agency is out $10,000. What does the agency do next?

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. Under ordinary circumstances, 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.

Why Do I Need to Know This?

For starters, if you have a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to get back its losses by boosting your premiums. On the other hand, if it has a knowledgeable legal team and goes after those cases aggressively, it is doing you a favor as well as itself. If all $10,000 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 at fault), you'll typically get half your deductible back, depending on your state laws.

In addition, if the total price of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as criminal law defense attorney Portland OR, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurance companies are not the same. When shopping around, it's worth comparing the records of competing companies to determine if they pursue legitimate subrogation claims; if they do so fast; if they keep their clients posted as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurance agency has a reputation of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.