What in the World Is Subrogation?

You may be tempted to gloss over the term "subrogation". After all, it sounds like complex legal jargon. However, if you hold a car insurance policy, it is a word that represents time, money and your rights to full and fair compensation as a law-abiding insured driver. It comes with both rights and responsibilities of which you should be aware.

What Is Subrogation?

To "subrogate" is simply to substitute one thing for another. When it concerns claims or rights, subrogating involves substituting one person for another. In auto insurance, it means that while your insurance company fulfills its services to you, it can also assume a legal right to collect reimbursement from another third party if they are at fault. It is most commonly associated with collision coverage.

Why Subrogate Claims?

When accidents happen, someone usually is at fault. However, most people cannot afford to wait months for car repairs or payments for other damages. That's why drivers carry auto insurance.

  • The party at fault is responsible, but working with an opposing insurance company or an uninsured or underinsured driver can be difficult and time-consuming. It may even require legal action.
  • Often, your insurance company will issue the necessary payments to settle your claim but then will collect reimbursement from the at-fault party via his or her insurance company or him or herself if necessary.

Essentially, your insurance provider forwards the necessary funds, intending to collect them from the at-fault party.

How Does Subrogation Work?

Many times, the entire process of subrogating a claim happens behind the scenes. Your insurance company's legal team will decide whether to pursue reimbursement and how that should happen. Additional investigation may be necessary, but ultimately, insurance companies often negotiate the recouped compensation well after your damages have already been paid.

State Laws on Subrogating Car Insurance Claims

Even though you typically will not be a part of the negotiations, you should know that each state has its own complex laws governing subrogation claims. These laws often address:

  • The insurer's duty to settle.
    • Insurance companies are legally bound to address in good faith claims against people they insure.
  • Excess versus primary insurance.
    • Some states may limit subrogation amounts to primary coverage at established limits versus excess increased amounts of coverage.
  • Third-party actions.
    • These typically include acts of bad faith when an at-fault party refuses to pay.
  • Multiple claims or claimants.
  • Multiple insured individuals.
  • Statutes of limitations.

When Your Auto Insurance Company Subrogates Your Claim

The circumstances that dictate when insurance companies must subrogate a claim are frequently stressful and difficult, like when:

  • The at-fault driver's car insurance company is uncooperative.
  • The at-fault driver is uninsured or underinsured.
  • The fault for the accident may be under dispute.
  • Damages may be extensive.
  • Prolonged litigation is necessary to recoup damages.
  • Damages recovered are only a small portion of the actual total payment.

In these cases, your car insurance provider acts in your stead. In subrogating your claim, the company usually pays you first and then seeks to recover the funds from the at-fault party. While the process often seems invisible and seamless, it's a valuable service that lets careful drivers keep driving and get on with life.