Definition of Insurance Subrogation

A simple fender-bender can get complicated when a subrogation dispute arises.
Image Credit: RobertCrum/iStock/Getty Images

In its most basic form, subrogation means a transfer of liability from an insurance carrier to another party. Subrogation features in many accident claims, as well as workers' compensation insurance matters in which workers, employers, vendors and other parties may be involved. This can lead to tangled disputes and, in some cases, a court hearing and judgment to straighten out the matter.

Basic Definition of Subrogation

Insurance companies claim subrogation when they believe they are not exclusively responsible for paying a claim. Instead, they claim that another party is at fault, wholly or in part, for the damages. A subrogation claim may take place once the insurance company or an insured individual makes a payment, oR if a deductible amount is applied.

Auto Accidents and Subrogation

Subrogation may arise after an auto accident. If you are found to be at fault, for example, your insurance company may be held responsible by the other driver's insurance company for payment of his medical or repair bills. After paying the claim, your insurance company may file a subrogation claim, insisting that the other driver contributed to the accident through his own negligence. Although police reports commonly assign fault for accidents, insurance companies can dispute this, or claim contributory negligence, if they have supporting evidence.

Notification of Subrogation

If an insurance company decides to pursue a subrogation claim, the process begins after any disputed payments have been made. The insurance company must notify its insured that it is going ahead with the claim, and may need the insured to provide evidence or testimony to support it. Any deductible amount that was applied must be refunded to the insured if the subrogation claim succeeds. If the insurance companies can't resolve the dispute, the claimant can file a civil suit and submit the matter to mediation or a court hearing.

Waiver of Subrogation Rights

Be cautious about any admission of fault made after an accident takes place or during an insurance claim. If the other party's insurance company asks you to sign any settlement documents, they may include a waiver of subrogation rights by your own insurer. This bars any future subrogation claims and may also be used by your own insurance company to deny payments on your behalf.