Insurance exists to protect you both legally and financially. The wide range of insurance products available to the modern consumer—from general liability to profession-specific—are too numerous to name. Chances are that some specialized form of insurance policy exists in nearly every industry. These products help mitigate liability and cover expenses in the event of an incident.
Despite the ubiquity of insurance in our modern life, four types of insurance products remain common among consumers nationwide. They are: homeowner’s insurance, auto insurance, workers'[ compensation insurance, and healthcare insurance.
For the average consumer, filing an insurance claim is relatively simple. Past an initial investigation conducted by an adjuster, the end consumer has little involvement with the insurance company’s interior workings. Most of the heavy lifting occurs in the insurance company’s back office.
One such task is the process of subrogation. For the most part, it remains safely hidden from public view, and yet it is often a necessary and integral step in the world of insurance claims.
Many insurance providers employ their own subrogation specialists. Sometimes, however, the process runs afoul and requires a lawyer’s intervention to resolve. Let’s go into more detail!
What does subrogation entail, exactly? The definition itself is deceptively simple, at least on paper.
Subrogation is the legal right of a person or entity to step into the role of another person or entity to seek legal or monetary compensation from a third party.
With subrogation, the entity that steps into the role of the consumer assumes all the rights and responsibilities of the original party. In practice, subrogation involves the insurance company stepping in for the insured, then pursuing monetary compensation from an at-fault third party.
To properly understand subrogation, you must first understand the basic anatomy of an insurance claim. Let’s look at a hypothetical situation.
Imagine you file an insurance claim for damage you or your property has sustained. Your insurance carrier, in turn, completes its investigation and sides with you. They issue you a check covering the cost of the damages, and that resolves the matter, right? It might end there for the customer, but the insurance company still has the matter of subrogation to resolve.
It’s not just the role of the insurance carrier to protect its customers from financial and legal liability; it’s also their job to remain solvent as a company. If they were to automatically disperse insurance payouts to all their customers while depending solely on premiums to drive their operations, they’d soon find themselves out of business! The insurance provider must attempt to recoup damages from the at-fault party to remain in business. They do this through the use of a subrogation lawyer.
Subrogation is the lifeblood of the insurance industry. Every year, insurance carriers in the United States leave more than $15 billion in damages on the table by failing to initiate subrogation.
For example, it’s estimated that in cases bearing comparative negligence, only 3% are ever subject to a subrogation proceeding. The result? A lot of insurance dollars left unclaimed.
Settling the claim upfront is ultimately a matter of customer service. Seeking recompense from a third party, however, is a matter of survival. For the most part, the customer never really experiences the subrogation process. Unless they read the small print in their insurance handbook carefully, they might not even be aware of what subrogation entails. While it might seem cut and dry on paper, depending on the industry involved (for example, healthcare, automotive, or homeowners insurance), the reality is slightly more nuanced.
Subrogation and the Auto Insurance Industry
The auto insurance industry is usually the most common context in which people hear about subrogation. Although subrogation is a much broader topic, a quick web search shows it is used most often in car insurance claims.
We’ve already reviewed the basics of subrogation where one party assumes the rights and legal obligations of another to pursue and recoup damages from them. This process is usually the territory of a subrogation lawyer. However simple the definition and process may seem on paper, there is an added layer of complexity specific to the auto insurance industry.
The issue revolves mainly around your deductible. When your car insurance carrier conducts its investigation following a car accident, they will often ask you to pay the deductible before covering the damages to your vehicle. Depending on your carrier, geographic location, and driving history, that deductible can be anywhere from a few hundred dollars to a few thousand.
Either way, it’s no small amount in a relative sense. While your insurance company may very well cover big picture damages, owing that deductible can produce a naked, vulnerable feeling amongst consumers, especially if the accident wasn’t your fault. Subrogation, therefore, is another way of protecting you.
Through the process of subrogation, a subrogation lawyer can pursue the cost of the vehicle’s damage from the at-fault party, but they can also attempt to collect the deductible. In cases where subrogation succeeds, you’ll get back what you already paid. Subrogation, however, doesn’t always succeed. It’s a legal proceeding after all, so lawyers cannot always guarantee success.
Subrogation is about protecting the customer while simultaneously protecting the insurance company’s solvency as well. Offering insurance carriers the opportunity to engage in subrogation with the help of an experienced, well-qualified lawyer helps to control costs by keeping the consumer’s premium costs down, and the insurance company’s assets well-protected.
Subrogation and the Health Insurance Industry
When it comes to the health insurance industry, subrogation looks slightly different from automotive subrogation in practice, although the core tenets remain intact. Take the topic of personal injury, for example.
With a personal injury case, the party who sustained the injury files an insurance claim with their carrier. Much like auto insurance, the health insurance carrier sides with the patient after a cursory investigation and then disperses funds to cover their client’s damages.
In some cases, the insurance company will then try to collect the compensation from the at-fault party. Again, this is very similar to the way subrogation works in general. However, the target of a healthcare-based subrogation process can be very different. There are cases in which the insured party does not utilize the correct insurance policy or product to cover their expenses. Take a hypothetical car accident for example. Let’s say you are driving through an intersection when another car runs the stop sign and crashes into you. The accident severely damages your car and causes injuries that require hospitalization. As you begin filing insurance claims in the aftermath, you submit a claim to your auto insurance carrier for the damages to your car and a claim to your healthcare provider for your medical treatment. Both parties cover their respective claims and you, the patient/consumer, go on with your life.
However, your healthcare provider launches a subrogation process against your auto insurance carrier after the fact, under the basis that your auto policy should’ve covered medical expenses as well. Healthcare subrogation often transcends the boundaries of the healthcare industry itself.
Other Types of Subrogation
While subrogation mostly occurs in the healthcare and auto insurance industries, it applies to a wide range of fields. Homeowners insurance and workers’ compensation are two such industries.
Unsurprisingly, a homeowners’ insurance subrogation proceeding closely matches that of automotive subrogation. When property damages occur in a home, the insurance company conducts a typical investigation, and then if they side with you, they will release funds for the damages while pursuing reimbursement from the at-fault party.
The only key difference here is the magnitude at which the subrogation process affects the homeowner. With homeowners insurance, deductibles can be incredibly expensive. Even a relatively small repair may result in a deductible of $10,000 or more. In the case of damages for which the property owner is not responsible, working with a subrogation lawyer is a lifeline. It is the only way to potentially recoup a significant amount of money.
Workers’ compensation subrogation closely mirrors its sister process in the healthcare venue. In a workers’ compensation case, a subrogation lawyer will help the insurance company go after financial compensation from the at-fault party (usually an employer or the owner of a job site), rather than placing the burden solely on the insurance company itself. There is little variance in the process other than the fact that larger sums of money may be involved.
The Full Value of a Subrogation Lawyer
Given that much of the subrogation process happens behind the scenes, it is not surprising that few people have a good idea of what subrogation actually involves. On the surface, it just seems like a mechanism that helps large-scale insurance providers collect reimbursement and recoup their losses.
However, the full role of a subrogation lawyer is more complex, and much of their job deals with enforcing public and consumer protection.
In short, the activities of a subrogation lawyer serve the greater public interest as well as that of major insurance carriers.
The subrogation process itself is an integral part of the insurance industry’s business model. It helps to further spread —or even completely mitigate—the risk that an insurance company takes on by extending coverage. Subrogation is one of the key drivers responsible for keeping premiums in check. Without a method to recover damages or hold at-fault parties responsible, insurance premiums would quickly spiral out of control! The idea of subrogation makes the industry’s business model more tenable.
Beyond that, subrogation lawyers can affect public safety on a large scale. Through subrogation investigations, legal professionals can identify widespread patterns, especially among major automotive manufacturers, airplane manufacturers, and developers. In essence, their efforts to recoup money from a third party, specifically major corporations in this case, serve as oversight into that company’s operational practices.
A subrogation proceeding reminds companies that someone is always watching and can help bring to light critical issues that internal investigation reports buried.
Hiring Your Own Subrogation Lawyer
Subrogation is an area of law that the public doesn’t understand very well. At its worst, it is a mundane form of practice designed to serve the insurance industry. At its best, it is a way to get your deductible back. From the general public’s point of view, what subrogation lawyers do sits in a very gray area.
Subrogation is, however, a critical part of the insurance industry’s business model, and another key form of public oversight and protection. Subrogation helps to keep insurance premiums affordable to the average consumer while restoring a sense of justice to the process. Through subrogation, legal professionals can hold at-fault parties responsible for their actions, at least in a financial sense. In a wider sense, subrogation is an instrument of enforcement that helps keep large-scale corporations focused on safety throughout their production process.