What Is Subrogation?

Fact-checked with HomeInsurance.com

1

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Although it happens mostly out of our sight, a significant part of car insurance payouts come down to negotiations between insurance companies. These negotiations determine who was at fault in a car accident. One of the tools available to car insurers engaged in these debates is subrogation.

At its core, subrogation is a means of recouping losses. In this article, we will discuss the meaning of subrogation in the auto insurance world and the benefits and complexities of this tool.

What is subrogation?

What does it mean to subrogate? In auto insurance, it is when insurance companies try to recoup losses from each other while negotiating the fault of the vehicle accident.

In the auto insurance industry, subrogation insurance comes into play when an insurer seeks to recoup losses on behalf of their client and themselves. One common scenario is when the payout to fix the insured vehicles occurs before the fault is fully determined. As a result, the insurance companies may both make payouts, each with the hope that the other driver was at fault and may eventually have to repay the losses.

Depending on who is at fault and whether both drivers are insured, subrogation can look slightly different. If fault is unclear, the insurance companies will make their payouts, and you will spend your deductible. Afterward, fault will be determined, and the party at fault will have a subrogation claim filed against them with their insurer by the insurer of the party that was not at fault.

In a situation of partial fault, the same process will occur, except that both insurers may be subrogated, each for only a portion of the deductible and insurance payout. This portion is determined in conjunction with the percentage of fault calculated for each driver.

In the case of having an accident with an uninsured driver, the insurance company will file its subrogation claim directly with that driver as they have no insurer to represent them.

An example of subrogation

Anytime your insurance company attempts to recoup losses on your behalf, it will do so through the subrogation clause. Let’s walk through an example of subrogation.

John and Bob are both insured drivers in Atlanta, Georgia. John and Bob, driving on parallel roads, both pull up to a four-way stop. Neither is paying close enough attention, and each believes he has the right of way. They both go and promptly collide.

John and Bob exchange information and each denies fault. Both have full coverage insurance on their vehicles and are prompt on their claims, specifying work and livelihood as an immediate need for vehicular repair.

Bound by their contracts, the insurers pay the policyholders out of pocket while working to determine where the fault lies. John and Bob now have their payouts and have paid their deductibles. After a few weeks, the companies determined that John was at fault.

At this point, subrogation occurs as Bob’s insurer files a subrogation claim against John’s insurer on Bob’s behalf. After the subrogation claim is filed, if all goes well for them, Bob and his insurer will both see a return of finances.

In this situation, Bob may receive some of his deductible back, and his insurer may gain some of the money back that they paid out to him.

Benefits of subrogation

Subrogation benefits insured drivers by helping them to save money on their premiums in general and their deductibles when they are not at fault. When your insurer files a subrogation claim on your behalf, your deductible may be part of the losses that they try to recoup.

Subrogation also protects the insurance company from excessive financial losses, helping to protect its bottom line and financial strength. In turn, subrogation makes it safer and more strategic for the insurance company to offer lower premiums.

Stay in touch with your insurer during any subrogation claim while they negotiate on your behalf. Being available to answer questions and provide evidence and documentation can aid your insurers’ case.

Waivers of subrogation

Subrogation rights can be waived by the party that would be represented. This can occur in situations where the drivers in an accident agree upon a specified sum, effectively cutting the insurer of the not-at-fault driver out of the equation. In this situation, the not-at-fault driver would accept the amount from the at-fault driver and sign a waiver of subrogation. This waiver would then bar the not-at-fault driver’s insurance company from pursuing any more money from the at-fault driver.

Frequently asked questions

How long does subrogation take?

The process can be quick and smooth if one side has a significantly more persuasive case than the other. In such a situation, it might be done within a few weeks. However, more complicated scenarios can take half a year or more.

Does subrogation affect insurance premiums?

Yes, but it’s complicated. Subrogation allows companies a higher degree of financial security and, as a result, encourages lower rates. Also, drivers with good records will be less expensive to insure than they otherwise would be, and this is reflected in lower premiums for such drivers.

What do I need to do during a subrogation claim?

Only what your insurer asks of you, which will usually consist of answering a few questions to aid them in their claim. For the most part, though, your insurer is representing you and taking any actions that you otherwise might need to take.