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What Is Subrogation?

If you suffer an injury that leads to an insurance claim, the insurance company will want to know that the circumstances and amount of damages in your claimed event fall within the scope of your coverage. Once the insurer approves a claim and submits a verified payment to a claimant, the insurer may then investigate any known at-fault parties involved in the claimed event. During the claims adjustment process, the claims adjuster will likely ask if a claimant knows of any party who may be liable for the claimed damages or if the claimant intends to take legal action against an at-fault party.

This investigative process is subrogation, a method of determining liability for a claimed event covered by insurance. Subrogation helps alleviate the financial strain of paying a claim for an insurer. For a very general example, imagine an individual suffering $10,000 worth of medical expenses. The victim files a claim with an insurance company, and subrogation allows the insurance company to pursue compensation from the at-fault party. This prevents a “double recovery” or windfall for the injured claimant. Subrogation prevents an injured party from filing an insurance claim and then filing a civil action against an at-fault party for the same damages.

Asserting Subrogation Interests

Every state has unique laws pertaining to an insurance company’s rights to subrogation. In an injury case involving an innocent paying party or a collateral source such as an insurer, subrogation allows the insurer to stand in place of the injured party against the at-fault party. When the collateral source files for subrogation, they cannot claim more than the injured party would have been able to claim in a civil action against the at-fault party.

Some states also have comparative negligence laws that may influence the amount of recovery a claimant can receive after a claimed event. For example, if an insurer decides to subrogate your claim and the judgment determined you were 20% at fault for the claimed event, the insurer’s financial obligation to you drops by 20%.

Car accidents are a leading cause of subrogation efforts from insurers, and some insurance companies attempt to include subrogation waivers when they pay settlements to claimants. When an at-fault driver’s insurer pays a claim from an injured driver, the insurer essentially steps into the place of the defendant.

A subrogation waiver in a settlement agreement would prevent the injured party’s insurer from filing for subrogation against the at-fault party’s insurer and securing compensation the at-fault party’s insurer already paid to the injured claimant. The injured party’s insurer may refuse to pay a claim if a claimant waives subrogation in a settlement agreement, because they will not be able to seek compensation from the at-fault party’s insurer.

Will Subrogation Affect My Claim?

If an insurance company pays you anything, the insurance company will likely initiate subrogation if any other party bears liability for your claimed event. If you file a claim against an at-fault party’s insurance policy, it’s a good idea to have an experienced attorney help you with the initial demand letter and determine the role subrogation may play in your claim. An at-fault party’s insurance company may pay you to fulfill its duty of indemnity to you and your damages before the investigation to determine fault for the claimed event concludes.

An injured claimant may not be able to wait for an investigation to finish due to medical expenses and other significant damages, so the insurance company generally starts the subrogation process once the investigation determines fault for the claimed event. An attorney can help a claimant navigate the claims process and determine other options for legal recourse against an at-fault party.