Subrogation is by far the BEST tool you have in the event of a claims issue. But unless you work in insurance, chances are good you’ve never heard of it. In the next few paragraphs, I’ll explain what it is and offer many examples (from our claim files) how subrogation saved the day for our customers.
What is subrogation?
In simplest terms, subrogation is the process by which your insurance company collects money paid on your behalf from the at-fault insurance carrier. So basically, you use your insurance to pay for a claim (even when someone else is at fault) and then your insurance company goes to the other carrier to recoup the money they paid.
Why would anyone use subrogation when another party is at fault?
So, we’ve long been taught that if someone else is responsible, then that person should pay. However in the world of insurance, it’s not quite that simple. Subrogation is a great resolution in those situations where you need a timelier than usual response to a claim or you’re getting no response/resolution from the at-fault party.
Here are several examples of when our insureds decided to use their insurance to get a claim paid INSTEAD of counting on the at-fault party.
- Our insured was involved in a chain reaction accident (was middle car). Due to the complexity of the situation and number of cars involved (and the fact our insured had NO vehicle to use), he put in a claim for the collision coverage on his car. This allowed him to work with HIS insurance company to get the vehicle fixed quicker and him back on the road quicker.
- Our insured was T boned by another vehicle. Although the claim was turned in to the other carrier, the at fault driver was not responding to the adjuster’s request for a statement. As is typical with car insurance accidents, the adjuster takes a statement from all parties involved. That along, with an accident report helps determine who’s responsible. This can take time and when the person responsible does NOT comply, the process is slowed down dramatically. Just like the previous example, our insured used her collision coverage to speed up getting her vehicle fixed.
- After an accident in which our insured went to the hospital for medical attention, and the other insurance carrier was still figuring out liability, we advised the insured to use the medical payments on his policy to pay medical bills. Medical payments is simply a no-fault coverage that you or your passengers can use to pay medical bills as the result of an accident. No arguments- just submit those bills to the adjuster and they will pay up to the policy limit (we recommend a minimum amount of $5,000 and higher limits are available). Because as you probably know, the medical providers expect to be paid in a timely fashion, and they’re not picky about who pays it.
- After an accident in which our insured was not having much luck getting hold of the adjuster, she turned in a claim for collision and rental reimbursement. She had to get to work and had no other vehicle. So she was able to get a rental car for the time her car was non-functional and while it was in the shop getting fixed.
Although the above are examples of auto insurance situations, subrogation can easily apply to many types of insurance. Here’s one from the homeowners insurance files.
- Our insured had a bathroom remodeled. Unfortunately, the plumber made a mistake and the pipe behind the bathtub broke and leaked all over the bathroom and into the hallway. Flooring and drywall were damaged. The plumber was being difficult, so our insured turned it in to his carrier for resolution.
It’s important to note here that you have to have the coverage on your policy in order to use it. So if you don’t have collision coverage, you can’t go that route and therefore subrogation is not available. Just like rental reimbursement- you have to have it on the policy to submit that claim.
The BEST part about subrogation
Most people forget that when you buy an insurance policy, you’re not only buying COVERAGE in the event of a claim, you’re also buying legal protection. The insurance company has a full team of lawyers that will represent you in the event it’s required. These lawyers also work on the subrogation side.
These lawyers know the “language”, know the process and will work on your behalf. I don’t know about you- but I have no desire to go to law school. So once the claim goes to subrogation, you’re letting the insurance company do all the heavy lifting. Between you and me, I’ll gladly let the people who have the training, knowledge and experience go to bat for me.
A side note: you’re also using YOUR policy. Your insurance company has a vested interest in taking care of YOU. As a claimant, the other insurance company does not.
What’s the downside of subrogation?
The positives far outweigh the negatives, but there are few downsides of the subrogation process you should know about.
- If there is a deductible to be paid, you have to pay it. Remember, it’s YOUR policy, so the coverage works the same. For example, if you have a $500 collision deductible and you turn in the collision claim, you’ll pay $500, regardless of the situation.
- There’s always a chance the insurance company won’t be able to recover your deductible or can only recover a portion of it. Yes, it happens. They will try their hardest to recover on your behalf, but there’s a lot of legal maneuvering that happens and sometimes there’s a judgment where the other party is ultimately NOT held responsible, and thus there’s nothing to recover.
- While using your policy to get your claim settled is usually very timely, the subrogation process is not. It can take insurance companies months, if not years to recover money. Still, it’s the best solution we have for now.
The lesson here?
Subrogation allows you to use your policy to get a quicker resolution for a claim, especially in the instance there are significant damages or injuries that need attention.
When it comes to insurance protection, you cannot count on others to have the proper coverage to protect YOU. So it’s up to you to make sure your policies have sufficient coverage in the event you need to use your policy first and then go the subrogation route.