Here's what to expect if your insurer begins subrogation proceedings.
What is subrogation?
Subrogation is a legal right that allows your car insurance company to pay for your damages before pursuing the responsible party to collect the debt it's owed.
If your insurance company pays you for a claim and determines you’re not liable for causing the damage, they will take legal action against the at-fault party to collect all or some of the funds they paid out. Insurance companies will pursue subrogation for the purpose of recouping the costs of a claim for which it doesn't take responsibility — this includes property damage, medical bills, and other expenses. Subrogation is a behind-the-scenes legal process that happens between insurers of all parties — or sometimes individual drivers — that may have been involved in the accident.
By law, insurers must inform policyholders of their intentions to enter subrogation. Luckily for you, you don’t need to do much on your end. You can let your insurer try to advocate for you and recoup some of your costs — namely your deductible — on top of theirs as they negotiate with the other party’s insurance company to settle who is financially responsible.
The insurance claims process and subrogation
What makes an insurer choose to subrogate and how does subrogation work? It depends on the kind of claim they paid out on. Below are common situations that may result in subrogation.
Fault is unclear
Let’s say you’re involved in a car collision, and you and the other driver have a dispute over who caused the crash. You need your car fixed quickly so your insurer pays to get your car repaired. Now you’re out your deductible and your insurance carrier is out the expenses, while both involved insurance companies conduct their own investigations to gauge liability. If your insurance company determines the other driver was at fault, it will file a subrogation claim with the other insurer to try to recover any funds they paid out.
If you and the other driver both are found at fault, any payout after subrogation would be split proportionally to how much fault each driver is liable for. For example, let’s say your insurance company paid out for damages amounting to $4,000 after you paid $1,000 to cover your deductible. After an investigation, you’re found to be 40% liable while the other driver was responsible for 60%, so your insurance company files a subrogation claim with the other party’s insurer. The maximum amount they would be able to recover is $3,000 — 60% of the total you and your insurer paid for your vehicle repair because that’s the portion of fault assigned to the other driver.
Similarly, don’t expect to receive your entire deductible back — your deductible covered 20% of the repair costs, while your auto insurance covered the remaining 80% — so these percentages would also be used to split the recovered funds. So you’d get $600 while your insurance company would receive $2,400.
The subrogation process remains largely the same if you make a claim against an uninsured driver, except for one key difference — instead of filing a subrogation claim with another insurance company, your insurer will try to recoup the costs directly from the uninsured motorist.
Unfortunately in these cases, it’s less likely your insurance company will recover the full amount and these proceedings can take longer to settle.
How long does subrogation take?
This really boils down to the specifics of the insurance claim. If fault is clear-cut — if, for instance, a driver clearly ran a red light or you were rear-ended — subrogation would be straightforward, as your insurer would have a stronger case to make against the at-fault driver.
Depending on the details of the claim — and whether or not all involved drivers have acted in good faith — negotiations can be drawn out or quickly resolved if the facts are unambiguous and not contested by the other party.
What is a waiver of subrogation?
You might come across a waiver of subrogation if you’re settling with an at-fault driver or insurance company. This waiver prevents your insurance company from pursuing subrogation with the other party — and is usually part of the deal when you and the at-fault driver agree to settle for a certain amount. It’s important that the amount you receive for damages is about as much as you would get from your own insurance company. Once you’ve been paid, the waiver of subrogation effectively bars your insurance company from trying to recover more funds from the other driver.
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