What is a Subrogation Claim?

Subrogation is the legally established right that enables one party to make a payment on a claim for damages that is actually owed by another party, and allows them to later collect the money from the party who actually owes the debt.

The entire insurance industry is built around the legality of subrogation claims, and could not function smoothly without it.

The most common type of claims that are subrogated are property damage claims specifically related to automobile accidents.

While nearly everyone who operates a motor vehicle has an insurance policy, most people aren’t familiar with this type of claim because it’s generally something that happens only between insurance companies.

Example of subrogation in an auto accident
Let’s say you are involved in an automobile accident where nobody is injured, but there is damage to both vehicles. The accident was not your fault, and so your insurance company will pay for the repairs to your vehicle after you’ve paid them your deductible (if any).

Next, your insurance company will then make a claim against the other party who was at fault in the accident in order to recover the cost they just paid to repair your vehicle. This is subrogation in action.

In other words, your insurance company fronts you the money to repair your vehicle, knowing that they will be able to collect the money from the party who caused the damage to your car.

By law, during the process of subrogation, your insurance company is required to at least attempt to recover the cost of the deductible you paid to them (if you paid a deductible). If they are successful in recovering your deductible from the responsible party, it must be refunded back to you.

When is subrogation used?
As standard practice, anytime you file an insurance claim where another party is at fault, your insurance company will usually pay your claim to cover your damages, and then seek to recover all or a portion of the money they paid from the party at fault.

Because fault is usually determined through an in-depth investigative process, the final decision regarding who owes whom takes some time to come about. In the case that the claimant cannot wait to be paid, the insurance company simply pays now, knowing it can recover the cost later through a subrogation claim.

Subrogation claims and partial fault
Sometimes during a subrogation claim, the insurance company may find you partially at fault, in which case, the amount of your deductible you can recover is prorated according to the percentage you are at fault. For example, if you are 30% at fault, you are entitled to recover 70% of the deductible you paid to your insurance company.

Subrogation waivers

Sometimes insurers insert a “waiver of subrogation clause” into an agreement to prevent your insurance company from attempting to get reimbursement for money that it has paid out to you. If you waive subrogation after an accident, your auto insurance company may refuse to pay your claim because they wont be able to seek reimbursement from the other driver’s insurance company.