The term subrogation, or “subro," refers to 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.
Basically, if you're in an accident caused by another driver and your car insurance company pays you for the damage, subrogation is the process of your company trying to get paid back by the at-fault driver or their car insurance company.
What is subrogation in car 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 companies will fight over who is responsible for the cost later.
What is subrogation in simple words?
Subrogation just means your insurance company is trying to get its money back from the at-fault driver.
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 for car insurance?
There are several steps to the subrogation process when it comes to car insurance:
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.
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.
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.
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 in car insurance?
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.