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What is subrogation?

Insurance Subrogation

Insurance Subrogation Claims

Subrogation is the legal technique where one party, usually the insurance company or insurer, steps into the insured’s shoes, so as to have the benefit of the insured’s rights and remedies against a third party such as a defendant.  Subrogation most commonly arises in relation to policies of insurance, but the legal technique is of more general application.

So, let’s say you are in a car accident and you are insured by a certain auto insurance company.  Your insurance company will pay in full to have your car repaired and will then sue the person who hit you for negligence in order to get that money back.  So, we can say that your insurance company has stepped into your shoes because you have given your insurance company the right to pay for the damages as well as go after the defendant (or the right of subrogation).

Here’s another example:

Suppose you’re in a car accident and it is clearly not your fault.  Your car is wrecked and your neck and back have been injured.  You are covered for both the damage to your car and your personal injuries, and so you call your insurance company and they pay all of your expenses relating to the accident.  Later, your insurance company, realizing that the other party at fault also has insurance that will cover the damages, seeks out reimbursement from that insurance company since its insured was actually at fault for the accident.  This is called subrogation.

Subrogation refers to an insurance company seeking reimbursement from whoever is legally responsible for an accident after the insurer has paid out money on behalf of its insured.  After paying your claim, your insurer is “subrogated” to the rights of your policy and can “step into your shoes” to go after or sue the negligent party on your behalf.  Not all insurers subrogate for medical bills.  If they do, it could be against the other driver’s insurance, but it could also be against your own separate health insurance policy or any other medical insurance that would cover your treatment.

Practical Tip

Even though I’ve never met an adjuster that went to medical school, they seem to know just what treatment is right for you!  Usually, they “know” that you were over-treated because “our computers say you should have been better by now.”  Oh, and the amount the medical provider charged you was unreasonable, even if your health insurance company didn’t have a problem with the amount when they paid it.

Andrew Traub

Subrogation may also be employed when your insurer settles your collision claim for damage to your vehicle due to another driver’s negligence.  Generally, your insurer will have you sign a subrogation release that assigns your right of recovery against the person responsible for your loss to them. Insurers may not stall settling your claim until they get paid from the person at fault. Subrogation usually occurs some time after the original claim is settled.  Some insurers will include the deductible when they subrogate and you will get your deductible back when the other driver or their insurance company pays the subrogation claim.

There are several categories of subrogation including:

  • Indemnity insurer’s subrogation rights
  • Surety’s subrogation rights
  • Subrogation rights of business creditors
  • Lender’s subrogation rights
  • Banker’s subrogation rights

All the various types of subrogation are conceptually the same, but they each have subtle distinctions in relation to the application of the law of subrogation.

What if the accident was your fault?

If the accident was your fault, you are responsible for the damages caused. If the accident was only partly your fault, you may be only responsible for a portion of the damages. The other driver’s insurance company will likely subrogate against you or your insurance company to pay for the damage to their insured’s car and/or their medical bills. Keep in mind that often you can negotiate the amount of damages that is being claimed and pay out the amount over time. If you don’t have insurance and a claim is being subrogated against you, it is a good idea to contact a car accident lawyer to make sure you are not getting taken.

If you were involved in an accident in Texas, we’ll be happy to mail it to you (together with a host of other free stuff.) You can either email us, call us at (512) 343-2572, or fill in the form to the right.

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