We present a comprehensive experimental characterization of the dynamics of semiconductor lasers subject to polarization-rotated optical feedback. We find oscillatory instabilities appearing for large feedback levels and disappearing at large injection currents, which we classify in contrast to the well-known conventional optical-feedback-induced dynamics. In addition, we compare our experiments to theoretical results of a single-mode model assuming incoherence of the optical feedback, and we identify differences concerning the average power of the laser. Hence, we develop an alternative model accounting for both polarizations, where the emission of the dominant TE mode is injected with delay into the TM mode of the laser. Numerical simulations using this model show good qualitative agreement with our experimental results, correctly reproducing the parameter dependences of the dynamics. Finally, we discuss the application of polarization-rotated-feedback induced instabilities in chaotic carrier communication systems.