The law profession tends to use elaborate definitions to confuse people, and subrogation is a perfect example of this obfuscation. Chances are, you don’t hear subrogation every day. However, it can be an important term if you’re involved in an accident of any kind.
Subrogation plays a vital role in both health, car, and homeowner policies. It gives your insurer the authority to pursue the at-fault driver for damages to the policyholder. Insurance companies usually handle this process behind the scenes, but it can come into play if you have a first-party policy, such as collision.
Using a personal injury or car accident lawyer can help you recover the damages from a car accident and protect you from insurance companies seeking reimbursement from you when you weren’t at fault. Subrogation also benefits you even if you aren’t involved in an accident. For example, it keeps premiums low because it shifts costs to at-fault drivers and their insurers.
Taking a Closer Look At Subrogation
To better understand subrogation, let’s take a look at a typical example. You stop at an intersection. When the light turns green, you try to cross the intersection, and another driver runs a red light, crashing into you. The accident causes $7000, but the other driver disputes that he/she was at-fault.
Needing to fix your car, you file a claim with your insurance company and pay your deductible. After your insurance company covers your damages, it seeks subrogation from the at-fault driver’s insurance company. The at-fault driver’s insurance company pays your insurance company the full $7000. The insurance company then repays you for your $1000 deductible and keeps the $6000 to recover its expenses.
Conversely, if you’re at-fault in an accident, the other driver’s insurance company can seek subrogation from you or your insurance company.
What to Expect During Subrogation
If your insurance company seeks compensation from another insurance company, it must notify you. Your insurance company should handle the entire process. However, you should keep in mind that state laws vary, so some of your claims or expenses may not qualify for subrogation.
Subrogation should not impact your insurance coverage or driving record. Still, it could impact your rates, so you should understand what to expect if you receive a notice that your insurance company is in the subrogation process.
In some subrogation instances, you may not receive your full deductible. For example, if your insurance company settles with the at-fault driver’s insurance company for 90% of their entitled compensation, they may take the remaining ten percent from your deductible.
Subrogation Benefits
Subrogation reassures your insurance company it can provide coverage and recuperate its losses. Because your insurance company feels confident they can recover their losses, they are more inclined to pay their claims quickly and take care of your damages. Subrogation also acts as an intermediary in the insurance process, protecting you from legal headaches such as dense paperwork, lawsuit costs, and other disputes.
How Long Does Subrogation Take?
Subrogation doesn’t have a fixed time-table. Its length depends on factors such as whether the at-fault driver disputes the claim or whether his/her insurance company delays making your insurance company whole. The process can take even longer if the at-fault driver didn’t have insurance.
Uninsured Drivers
Coordinating subrogation is much simpler when insurance companies handle it amongst themselves. If the at-fault party is uninsured, your insurance company must undergo a lengthy legal process of recovering their losses from the individual driver. What’s more, most uninsured drivers don’t have insurance because they can’t afford it. If they can’t afford insurance, chances are, they won’t be able to afford repaying your insurance company.
Contested At-Fault
If both drivers are at fault or unclear who is it at-fault, the subrogation process could take longer. These instances can delay the subrogation process because the court has to determine how much compensation your insurance company is entitled to. In situations when you’re partially at-fault, your insurance company may not recover anything. Most of these scenarios depend on the state’s law.
Subrogation Waiver
Waiving subrogation prohibits your insurance company from pursuing at-fault parties. It most often occurs when the at-fault party wants to settle without involving the insurance company. However, before you sign any waivers, you should consult with your insurance company. Not every insurance company allows policyholders to sign a subrogation waiver.
Other Common Subrogation Types
Subrogation doesn’t only affect car accident cases. The following examples are some of the most common types of subrogation clauses outside of car insurance. While subrogation clauses vary, they have the same aim.
Property Policies
Subrogation in property cases arises when a negligent party causes damage to another’s property. Just as in auto accidents, the insurance company will cover the policyholder for their injury. If the at-fault person who caused the damages does not have insurance, your insurance company will pursue them to recover their losses.
Commercial Liability Policies
Commercial liability subrogation clauses use the same language that other insurance policies use, stating that, “if the insured has the right to recover all or part of any payment the insurer makes under the policy, those rights transfer to the insurer.”
Liability insurance means that your insurance company covers you in case you cause damages to someone else. For example, if you own a store and one of the walls suddenly collapses, injuring someone in the store, your liability insurance will cover the injured party’s losses.
But suppose your insurance company investigates and finds a contractor failed to construct your wall safely. In that case, your insurance company can seek compensation by suing the contractor or settling out of court with the contractor’s insurance company.
Workers’ Compensation
The Standard NCCI workers compensation policy has two subrogation clauses that cover how they recover their losses. The first clause covers how the insurer can recover its losses from both the company providing workers’ compensation and the employee who receives those benefits.
In some states, injured workers can collect both workers’ compensation and sue the negligent party for damages. However, most states don’t allow this practice because it means parties can receive double compensation. These states make the injured reimburse their insurer if they receive an additional payment from the negligent party. After compensating their insurer, the injured party can take home any remaining damages.
The second clause covers employers’ liability coverage. This section details how, if the insurer pays damages to injured employees, they have the right to sue the party who caused the injury to recover their damages.
Conclusion:
Subrogation Can Be Complex. Consult With Your Attorney or Insurance Company to Determine Your Rights.
Subrogation law can get tricky because it involves many parties. Adding factors such as determining fault can make it even more complicated. Though you will likely never deal with subrogation outside of your insurance company notifying you when they’re seeking it, some circumstances make consulting with an attorney advisable.
It’s also crucial to understand you should never waive your subrogation clause without first discussing the consequences with your insurer.
