The Subrogation of Insurance Claims

If you are involved in an accident that is someone else's fault and you make a claim on your insurance policy, your carrier has the right of subrogation. Subrogation is a term used for when an insurance company pays out a claim and then attempts to collect the money it paid out from the responsible person or that person's insurance carrier.

The word subrogation comes from the Latin subrogare, meaning "to stand in the place of." When you are in an accident and sustain injuries or damages because of someone else's negligence, you have the right to get reimbursed from the negligent driver. However, when you claim on your insurance, you transfer the right of subrogation to your insurance company, which may then collect from the responsible party. Although subrogation is common in auto insurance claims, it can be applied to any type of insurance.

The exact procedure will depend on your specific insurance company. Subrogation may occur after the claims adjuster has completed the claim or it may happen during the claims process. An inhouse subrogation department will try to contact the responsible party or the party's insurance company to collect the amount due. While many cases are settled through a negotiation process, some subrogation cases may end up in court. If that happens, you may have to make a court appearance.

Subrogation has the effect of keeping your costs down in two ways: recovery of your deductible and stopping unnecessary rate increases. If your insurance company sues the responsible party for the costs incurred during the claims process, you will be able to get your deductible refunded from the other party. Even if your insurance company chooses not to pursue subrogation, you can still try to recover the deductible from the other party on your own -- perhaps through small claims court. In addition, because someone else has reimbursed your insurance company for the claim, your rates won't be increased.

Your insurance company must inform you if it plans to pursue subrogation and if the insurance company collects from the other party, it is required to reimburse your deductible to you. You are in turn required to cooperate with the insurance company's subrogation efforts as stated in the insurance policy. Legally, you can't do anything that would prevent your insurance company from collecting funds from the other company. For example, you cannot sign an agreement releasing the other party from blame.