What is subrogation?

Subrogation is the process that allows your insurance company to try and recoup their money from the at-fault party in an accident.

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Rachael Brennan

Rachael Brennan

Senior Editor & Licensed Auto Insurance Expert

Rachael Brennan is a senior editor and a licensed auto insurance expert at Policygenius. Her work has also been featured in MoneyGeek, Clearsurance, Adweek, Boston Globe, The Ladders, and AutoInsurance.com.

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The term subrogation, or “subro”, refers to both the right your car insurance company has to pursue reimbursement after paying a claim and the process that allows your car insurance company to try and recoup their money from the at-fault party or their insurance company after an accident. 

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Key takeaways

  • Subrogation describes an insurance company’s right to legally pursue reimbursement from an at-fault party after paying a claim. 

  • Subrogation is a legal way to protect both you and your insurance company from paying for a car accident that wasn't your fault.

  • If you don’t receive a payment from your insurance company there is no subrogation involved in your claim.

  • Depending on the laws in your state, if your insurance company doesn’t pursue subrogation you may legally be allowed to sue the other driver and their insurance company to cover your out-of-pocket expenses.

What is subrogation in insurance?

Subrogation is a behind-the-scenes process that most insurance customers don’t ever see, allowing people to get paid after a car insurance claim without fighting over who owes what. It means you can get paid for your third party claim right away and the insurance company will fight over who is responsible for the cost later. 

What is subrogation in simple words?

The simplest explanation is that subrogation is a way to protect both the driver and their insurance company from paying for a car accident that wasn't their fault. The insurance company pays your claim and then goes after the other driver for the cost. 

How does subrogation work?

There are several steps to the subrogation process:

  1. Paying your claim: In a subrogated claim, the first step is getting a payment from your insurance company, according to the terms of your policy. If the other driver or their insurance company pays you directly (or if you receive no payment at all) there is no subrogation involved in your claim.

  2. Notice of intent: Your insurance company will likely send you a notice of intent to tell you know they are taking your claim to subrogation. If the insurance company doesn’t pursue subrogation you may legally be allowed to sue the other driver and their insurance company to cover expenses you paid out of pocket, but this all depends on the laws in your state.

  3. Going to court: Subrogation is a legal process, which means your insurance company will likely end up arguing its case in front of a judge or a mediator. Policyholders aren’t usually involved in a subrogated claim, so you probably won’t know much (if anything) about the insurance company’s court case against the other driver.

  4. Receiving payment (or not) from the at-fault driver: The judge or mediator will decide whether or not your insurance company is entitled to recoup the money they paid out for your medical bills.

What is an example of subrogation?

Depending on the situation, subrogation usually happens one of three ways.

1. You’re not at fault

Let’s say you have uninsured motorist coverage and you were hit by an uninsured driver who caused $4,000 in bodily injury damage. Your insurance company would write you a check for the $4,000 so you can pay your medical expenses. The insurance company would then sue the at-fault driver for the $4,000 (and possibly the legal costs associated with taking them to court.) This prevents the insurance company from paying for a claim they aren’t responsible for and holds the at-fault driver responsible for the damages.

2. You’re partially at fault for an accident

If you are in an accident where you are deemed partially at fault, your car insurance company might use subrogation to recoup some of their expenses. For example, if you have a $500 deductible and you file a claim against your collision coverage for $10,000 because you were in an accident, your insurance company would pay you $9,500 for your claim.

If the police report shows that you were only 50% responsible for the accident, your insurance company can take the other driver’s insurance company to court to recoup the $4,750 that was the other driver’s responsibility.

3. When you’re at fault

If you are the one at fault in an accident, the other driver’s insurance company can use the subrogation process to force you to repay any claims that were legally your responsibility. If you have enough insurance to cover the cost of the claims, you likely won’t be part of the subrogation.

However, if you don’t have enough bodily injury and property damage liability insurance to cover the damages you caused in an accident, the other driver’s insurance company may take you to court. You could have your assets seized or your wages garnished to pay back the insurance company if the accident damage exceeds your car insurance limits, so it is important to choose the highest levels of liability insurance you can afford, preferably 100/300 or higher.

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Frequently asked questions

How long does subrogation take?

It depends on the circumstances of the claim, but subrogation can take several months from beginning to end. The more complicated the claim, the longer a subrogation case is likely to take.

What is a waiver of subrogation?

A waiver of subrogation is an agreement that stops you (or your insurance company) from trying to recover the money that was paid out on a claim. For example, you might sign a waiver of subrogation when agreeing to a settlement.

What does it mean if subrogation is pending?

Pending subrogation means that an insurance company is actively trying to collect money from an at-fault driver or their insurance company but the case isn’t over yet.

Is subrogation good or bad?

Subrogation is typically a good thing because it allows insurance companies to pay the costs for an injured party quickly without waiting for the at-fault party to come up with the money. It also lets the insurance companies recover costs from at-fault drivers, helping keep car insurance rates lower than they would be otherwise.

Author

Senior Editor & Licensed Auto Insurance Expert

Rachael Brennan

Senior Editor & Licensed Auto Insurance Expert

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Rachael Brennan is a senior editor and a licensed auto insurance expert at Policygenius. Her work has also been featured in MoneyGeek, Clearsurance, Adweek, Boston Globe, The Ladders, and AutoInsurance.com.

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