Subrogation

Subrogation can be best described as a substitution. It refers to the legal right of an insurance company to pursue a third party who caused damages to a policyholder’s property or car. The insurer serves as the policyholder’s substitute to claim money from the at-fault party. With this, the insurance company can be reimbursed for the claim amount they paid the policyholder.

Three parties are involved in subrogation. This includes the insurance carrier, policyholder and the third party who caused the damages or losses.

The process starts after the policyholder applies for claims for the cost of damages or losses due to an accident caused by the third party. The insurance carrier settles this claim if the policyholder is cleared of fault.

After that, the insurance company can begin the process of seeking reimbursement for the claim amount. While subrogation gives the insurance company a legal right to pursue a third party, the insurer must inform the policyholder first before entering subrogation.

Subrogation is the transferring of rights of the insured claimant to the insurance provider to pursue a third party for the damages they caused. Thus, the insurance company stands in the place of the policyholder. This is also known as “stepping into the insured’s shoes.”

Subrogation is used in different types of insurance, such as homeowners and healthcare policies. However, it is most common in auto insurance.

A car insurance company can opt to file a subrogation claim after paying out a policyholder’s claim. However, this does not necessarily mean that insurance companies will do this for all claims wherein the policyholder is not-at-fault. The eligibility of claims and expenses for subrogation may vary depending on state laws. Based on the settlement, you may also get a refund for your deductible.

If the third party has insurance, your insurer will negotiate with the other company.

Determining fault in a car accident is important, especially when it comes to subrogation. Generally, your insurance company can only pursue a case if you are not at-fault or only partially at-fault for the incident. Depending on the situation, the insurer may get full or partial reimbursement.

Here are some examples to help you better understand what subrogation means.

Let us say Driver A and Driver B were in a car accident and exchanged insurance information.

Because of this incident, Driver A needs to pay a total of $2,500 to repair all damages. After filing a claim, Driver A’s insurance provider paid out the full cost of the repair minus a $500 car insurance deductible. That means Driver A got $2,000.

After an investigation, the insurance provider found out that Driver B was the one responsible for the accident as it rear-ends Driver A. Therefore, the insurer decided to recoup the claim amount from Driver B. The company will file a subrogation claim against Driver B’s insurance company and represent the interests of Driver A to recover its losses due to Driver B’s negligence.

If the insurance company gets full compensation, they will get the $2,500. They will then give the $500 back to Driver A for his deductible.

Now, let us say that Driver A and Driver B were both at-fault for the collision and share equal responsibility. Driver A’s insurance company will pay out $2,000 ($2,500 cost minus the $500 deductible).

Then, the insurance company will file a subrogation claim to Driver B’s insurance company for $1,250. That reflects half the repair costs because Driver A is partially at-fault in the accident. If there are no issues with the case, the other insurance company will pay the $1,250. Driver A will also receive $250, which is half of his deductible payment.

In some cases, subrogation is waived. When that happens, the insurance company can’t pursue the negligent party or the negligent party’s insurance company.

A waiver of subrogation is often involved in settlements. It’s typically part of a deal between the at-fault party or their insurance company and the affected party. In this case, the affected party accepts to settle for a certain amount.

Signing the waiver means the insured party waives the right of their insurer to seek compensation for losses from the at-fault party.

Subrogation can serve as a protection for both the insured and the insurance company, but it’s not always applicable. We’ve provided some frequently asked questions (FAQs) to help you better understand the concept.

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