Subrogation: Insurance Law & Claim Examples

When you pay for insurance coverage, under most policies, your insurance company promises to pay for your damages if you were ever involved in an accident. However, if the accident was caused by a third-party, your insurance company may have further legal recourse to seek compensation for the claim they paid you when it pertains to health insurance or property damage to your vehicle. This process where your insurance company seeks compensation from the at-fault party is known as subrogation. Read on as we further discuss what the subrogation definition is, how it works, and why subrogation claims can benefit you.

What is Subrogation

What is subrogation in insurance? The literal meaning of subrogation is when one party stands in the place of another party. When you make an insurance claim under your insurance policy, your insurance company will compensate you for your damages. Once paid (or sometimes even before payment), they may file a separate claim against the at-fault third-party insurance company to recoup the loss for compensating you for your damages.  Under subrogation law, your insurance company essentially stands in your shoes when they take legal action against the third-party. They have all the legal rights you would’ve had as the injured party.  Subrogation insurance claims are common in the auto industry, but can also apply to other areas, such as the health care sector, workers’ compensation claims, and business insurance.

How Subrogation Works

An insurance subrogation claim involves three parties:

  • The injured party
  • The insurance company of the injured party
  • At-fault party (typically the at-fault party’s insurance company represents the at-fault party)

Generally, the first step in a subrogation claim is when the injured party initiates a claim with their insurance company (whether through health insurance or an automobile property damage claim). After asking a series of questions, the insurance company will pay the injured victim for their damages. Once paid, the insurance company of the injured party will initiate a subrogation claim with the party that caused the damages. Note that once paid, the injured party is not allowed to make an additional claim from the at-fault party.

What to Expect

For the injured party, there is not much action required in a subrogation claim. In most cases, your insurance company will notify you when they are about to pursue a claim. If the claim was successful, you may be able to recover the deductible you paid your insurance company. Depending on your state laws, different situations can lead to varying outcomes in regards to a subrogation claim:

  • Third-party was completely at fault and has insurance coverage. This is the simplest case, and your insurance company will proceed to seek full compensation from the third party insurance company.
  • Third-party was completely at fault and was uninsured. Your insurance company may sue the third party driver directly. The chances of recovering your deductible are slimmer.
  • Both drivers were at fault. There may be a limit on how much your insurance company can claim, based on the assigned fault between you and the other driver. You may recover a portion of your deductible, but likely not the full amount.

The Benefits of Subrogation

While it may seem subrogation only benefits your insurance company, there are advantages for injury victims as well. Here are some of these benefits:

  • A transfer of risk: A subrogation claim places the risk of failure to recover for a loss from you to your insurance company. 
  • Minimal involvement: Your insurance company acts as a buffer between you and the third party insurance carrier. You avoid dealing with the third-party directly, thereby avoiding lengthy court processes, mediation, and paperwork.
  • Keeps your insurance premiums low: Successful subrogation claims ultimately benefit the bottom line of insurance companies. These cost savings can pass down to you in the form of lower insurance premiums.

Waiving Subrogation

There are some instances when the at-fault driver may want to deal with you directly. If that’s the case, they may request you to sign a waiver of subrogation. This waiver prevents your insurance company from pursuing a subrogation claim with the third party. Some policies won’t allow you to sign a waiver of subrogation. Others may allow it, but you’d have to pay an additional fee. Always check with your insurance policy or personal injury attorney before agreeing to sign this waiver.

Subrogation & Lawsuit Settlement

Subrogation can get complex when the injured party launches a lawsuit against the third party. In this scenario, the insurance company of the injured party has already paid for all or some of the treatment. If you, as the injured party, then decides to seek legal action against the third party, your insurance company may initiate a subrogation action. This action allows them to recover expenses paid out to you previously, straight out of your settlement value. How much you owe your insurance company will depend on a variety of factors, including:

  • Insurance plan policy
  • How much they’ve already paid for your recovery
  • Severity of accident

Ensure you consult with a qualified personal injury attorney who is well-versed in subrogation law within your state. 

Valiente Mott

Understanding what a subrogation claim is and handling insurance companies can be confusing. If you were injured from an accident and would like to understand how subrogation affects your claim, contact us today. Our Nevada personal injury attorney experts will sit down with you in a free one-on-one consultation to assess your situation. 

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