If you’ve been in a car accident, you may know all about subrogation. If you haven’t, here’s what you need to know about the subrogation process.
The word subrogation may be a mouthful, but its meaning is easy enough to understand.
In a general sense, it means “one person or party stands in the place of another,” as findlaw.com puts it.
That definition changes a bit when the term is used in the context of car insurance.
Here, subrogation refers to when an insurance company pursues legal action against a driver – or that driver’s insurer--who causes an accident involving one of its policyholders.
An insurance company does this to recover some or all the money it paid out in a claim.
Here’s an example of how subrogation works with car insurance.
Imagine you’re in a traffic accident. You aren’t at fault – the other driver is. The crash causes $5,000 of damage to your car.
You file a claim with your insurer. Then you pay your plan’s deductible. Let’s say that’s $1,000. Your insurance company responds by paying you the remaining $4,000 you need to repair your car and get it back on the road.
It also files a subrogation claim with the other driver’s insurer – assuming he or she has one. That claim will be for $5,000.
If it’s successful and your insurer recovers that full amount, it’ll keep $4,000 and return your $1,000 deductible to you.
In case it’s not clear: you don’t have much to do during all of this. You just file a claim like you would for any other incident, and your insurance company takes care of the rest. The bulk of the subrogation process takes place behind the scenes between your insurer and the other driver’s.
Have you never filed a claim before? Read our article full of car insurance claims tips.
OK, let’s use another subrogation example to explain how things work in this situation.
Once again, you’re in an accident that causes $5,000 of damage to your car. This time, though, an investigation finds you partially responsible – 30 percent – for the crash.
Your first steps: call your insurance company, tell them about the accident, and then file a claim.
Then you pay your $1,000 deductible while your insurer pays the remaining $4,000 worth of damages. Your insurer will attempt to recover this money from the other driver, since they’re mostly responsible for the accident.
In this case, your insurer can recover a maximum of $3,500, not the full $5,000. Why? The other driver was only 70 percent at fault for the crash. Because of that, you and your insurance provider get just 70 percent of your money back.
Also, your auto insurance company won’t return your entire deductible to you here. You originally paid for 20 percent of your repair costs via your $1,000 deductible, while your insurer paid for 80 percent of it.
Those same percentages will be used to divide the recovered funds. In other words, you’d get $700 and your insurer would get $2,800.
What happens if you get into a car accident with an uninsured driver? The main difference in this situation is your insurance company would begin subrogation proceedings against the other driver directly rather than against another insurer.
Everything else about the process should be the same as what’s explained above. You report the accident, you file a claim, you pay your deductible. Then, the insurance company attempts to recoup the money from the responsible party. In this case, that’s the uninsured driver.
A subrogation claim filed against an uninsured motorist can differ from other such claims in two other ways. One is the process can take a lot longer than it does when it involves a pair of insurance companies. Another is the process is less likely to result in you and your insurer recovering all your repair costs.
Assuming you weren’t at fault, you’ll receive a percentage of the recovered amount equal to what you put in. So, if you pay – through your deductible – for 20 percent of your car’s repairs after an accident and your insurer pays 80 percent, you’ll receive 20 percent of the recovered amount.
This doesn’t only happen if you’re found partially at fault for a crash that prompts a subrogation claim. It also happens during what some call no-fault subrogation situations. Although insurance companies always aim to get back what they pay out these cases, they don’t always succeed. Sometimes they only recover part of that amount.
Regardless, the amount returned to you depends on the percentage you put toward repairs via your deductible.
Unfortunately, it’s impossible to say how long subrogation might last for you. Negotiations like this can go quickly or slowly. It all depends on the specifics
One thing you can be sure of is that the more straightforward your situation is, the more straightforward the subrogation process should be.
In other words, if the other driver is fully at fault for the accident and he or she is fully insured, the process shouldn’t take too long. If you’re found partially at fault for the accident, though, or if the other driver doesn’t have insurance, expect it to take longer.
You can waive subrogation, but it isn’t something you request of your insurer.
Instead, you’ll usually do this if you settle the accident with the other, at-fault driver or their insurance company.
During settlement negotiations like this, it isn’t unusual for the at-fault driver or their insurer to make you sign a waiver of subrogation as part of the deal.
What is a waiver of subrogation? It’s an agreement that prevents your insurance company from stepping in and trying to recover its (and your) losses.
If that sounds fine with you, consider this: your insurer may not pay your claim if you waive subrogation after a crash.
So, before you go this route, make sure the settlement you receive from the other driver is at least as much as what you’d get from your insurance company.
Here are some things to keep in mind if a car insurance company files a subrogation claim on your behalf:
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