What Is Subrogation In Insurance? – Forbes Advisor INDIA

When car accidents happen, the resulting expenses can be astronomical. Subrogation allows your insurance company to pay for your damage quickly, then work to recoup the money from the at-fault driver’s insurance company.

What Is Subrogation?

Subrogation gives insurance companies the right to seek compensation from the insurer of someone who is at fault for an accident. You give your insurance company the legal authority to pursue a case to recover compensation that it paid out to you after an accident when a claim is subrogated. Doing so enables your insurer to quickly pay your claim and then pursue a case against the responsible party to recover those funds.

Say you are involved in an accident and the other driver is at fault. The other party’s car insurance company is typically responsible for covering the costs of the repairs, medical bills and other expenses. If someone else is at fault after an accident, you can make a claim against their insurance. Or you could make a claim with your own insurance company, such as a collision insurance claim for your vehicle damage.

It may file a subrogation claim to recover the funds that were paid out after your insurer pays the claim. By using subrogation, the insurance company is seeking to recover the money it paid out on claims (and your deductible) for accidents that weren’t your fault.

Subrogation claims are primarily filed against the other person’s insurance company. But if the at-fault driver was uninsured at the time of the accident, your insurance company may try to go after the driver instead.

What Is the Purpose of Subrogation?

The main purpose of subrogation is to make it easier for you to be quickly and fairly compensated following an accident. Your insurance company can make sure your claim is taken care of in a timely manner and then have a way to recoup its costs by using subrogation.

How Does Subrogation Work?

The process is simple for the policyholder. Insurance companies typically handle subrogation among themselves, behind the scenes.

Subrogation typically starts with one insurance company sending a subrogation letter to the other insurance company and the at-fault party. This letter outlines the details of the claim, including the amount of the claim that was paid out by the insurance company. From there, the insurance company will work with the other party’s insurance company or the individual to handle the subrogation claim.

The insured parties will receive letters notifying them of the settlement once the insurance company’s subrogation claim is resolved. If you were not at fault and paid a deductible as part of the claim, that money may also be reimbursed as part of the subrogation settlement, depending on your state’s laws.

However, there may be cases where the insurance company is unsuccessful in recouping the full cost of the claim. If there are questions regarding who was at fault or if the at-fault party’s policy limits are lower than the cost of the claim, subrogation may result in a partial reimbursement. If that happens, you may not receive a refund for your deductible.

There may be a disagreement about who was at fault or how much compensation should have been paid In some cases. When this happens, the insurance companies use a mediation process to resolve the dispute or, in some cases, go to court.

Examples of Subrogation

Let’s take a look at a few scenarios that could end in your insurance company filing a subrogation claim against another party.

Say you filed a collision insurance claim for damage to your vehicle after being rear-ended by another driver, who was at fault for the accident. Your insurance company will pay your claim and may decide to file a subrogation claim with the other person’s insurance company in order to recoup the money.

Or say you were driving through a green light at an intersection and an uninsured driver ran a red light and caused you a neck injury. You could make a claim on your uninsured motorist coverage. Then, your insurance company could decide to sue the driver in order to recoup its losses.

What to Expect During Subrogation

The process of subrogation differs depending on who was at fault for the accident. There may be cases in which it may happen that you may not be found at fault for an accident, and a subrogation claim may be filed against your insurance policy. Here’s what you should expect from both scenarios.

When you are not at fault

The process of subrogation is generally simple when you’re not at fault for the accident. If your insurance company files a subrogation claim against another party, you will typically receive a letter or phone call about the claim from your insurance company. You may receive both. From there, the insurance company will take the lead to work with the responsible party to get reimbursed for the damages.

The claim will typically be resolved between the insurance company and the other party provided that there are no extenuating circumstances. Once it is, your car insurance company will notify you that the claim was resolved. If you paid a deductible, you may also receive a reimbursement check for that amount.

Some subrogation claims may be more complicated, especially if the other party denies responsibility or is underinsured. In those cases, you may need to provide more information to your insurance company to help resolve the claim.

When you are at fault

Your insurance company will take the lead on a subrogation claim if you are at fault for the accident. You may receive a letter notifying you of the subrogation claim from the other party’s insurance company, your insurance company, or both. If you receive a letter from the other party’s insurance company, you should be sure to notify your insurer so they can handle the claim in house.

In general, the subrogation claim will be paid by your insurance company and you will have little to do with the process. If there are questions regarding the accident and who’s responsible for the damages, you may need to provide more information to your insurance company. Or, if the insurance companies cannot come to an agreement on the claim, there may be a lawsuit filed to resolve it.