Subrogation: What It Is and How It Works
Subrogation is the process of reimbursing insurance companies for costs it covered during a claim. Subrogation typically happens behind the scenes between the insurance companies with little effort from you, but it’s important to know your subrogation rights just in case something should go wrong. If you need to negotiate with an insurance company about any damages or subrogation rights, call the number above to consult with an attorney.
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UPDATED: Jan 6, 2021
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Subrogation can be a difficult legal concept, but it’s something you should understand if you receive money from your insurance company.
If you are in a car accident and your car insurance policy covers you for both the damage to your car and your personal injuries, you call your insurance company, file a claim, and they pay all of your expenses relating to the accident. If the other party in the accident caused the damage, then your insurance carrier can get reimbursement from the other driver’s insurance company.
This process of reimbursing your insurance company for the bills it covered is known as subrogation.
Subrogation is typically done behind the scenes and without much effort from you, however, you should know your subrogation rights just in case there is a mistake that costs you money or the right to file a future claim.
What is subrogation?
Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured. This could include any money paid out for property damage, deductible amounts, diminished value, pain and suffering, loss of consortium, etc.
The definition of subrogation is the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties.
If the accident was your fault, you are responsible for the damages caused. The other driver’s insurance company will likely subrogate against you or your insurance company to pay for the damage to their insured’s car and/or medical bills. If you need to negotiate with an insurance company about any damages or subrogation rights, consult with an attorney.
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How does subrogation work?
The general rule for subrogation is that after paying your claim, your insurer is subrogated to the rights of your policy and can step into your shoes to go after or sue the negligent party on your behalf.
- Subrogation and Car Damage: Subrogation may be applied when your insurer settles your collision claim for damage to your vehicle due to another driver’s negligence. Generally, your insurer will have you sign a subrogation release that assigns your right to recover to them against the person responsible for your loss. Subrogation usually occurs after the original claim is settled. Some insurers will include the deductible when they subrogate and you will get your deductible back when the other driver or their insurance company pays the subrogation claim.
- Subrogation and Health Insurance: Not all car insurers subrogate for medical bills. If they do, it could be against the other driver’s insurance, but it could also be against your own separate health insurance policy or any other medical insurance that would cover your treatment once they have paid your bills. Keep in mind that health insurance companies also subrogate if they pay your medical bills and you later recover for injury costs in a lawsuit.
Whether you car or health insurance company subrogates, you will receive paperwork detailing the amount of money the insurance company has paid for your accident or injury claim, and explaining the company’s subrogation rights should you later recover for those same injuries or damages in a lawsuit.
What is a waiver of subrogation?
Some contractual agreements, require you to waive your right of subrogation (and therefore your insurance company’s rights) against the other party in the event of a claim. A waiver of subrogation prevents your auto insurance carrier from pursuing damages from a specified party. If you are ever asked to sign a waiver of subrogation you need to consider the following:
- Your policy may not allow it. Not all car insurance policies will allow you to waive the subrogation rights of your insurance company. Make sure you know what your policy says.
- Rights of subrogation should be waived only to the extent of your available insurance recovery. Waivers of subrogation will also waive your right to sue the other party for damages. You don’t want to be faced with waiving your rights of recovery, then having a $30,000 loss when your insurance policy limit is only $20,000.
- Waivers should be mutual. If you are waiving your rights of subrogation, the other parties of the contract should waive their rights against you as well.
If you are faced with a waiver of subrogation clause in a contract, it is a good idea to consult an attorney before waiving any rights or limiting the amount of damages you can recover.
How do you manage a subrogation claim?
It is best to cooperate with your insurer when a subrogation claim has been made. Of course, this is within reason as you never want to sign away all your rights in a claim.
A subrogation claim usually happens behind the scene. In most cases, the two insurance companies are going back and forth to verify what happened and what amounts have been paid out.
Unfortunately, this takes time. Be patient, but keep in close contact with your claims person so your claim doesn’t get pushed to the bottom of the pile! If you working on your own to recover your money and find that you are getting nowhere, contact an attorney that can help you find your recovery.
For more information about auto insurance claims, check out the following articles:
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