Subrogation is a term found in nearly every insurance contract, but it’s often overlooked or misunderstood by everyone except attorneys and insurers. When you have a mountain of insurance documents to go through, it’s easy to breeze past it without understanding the significance and impact it can have. If you are handling the details of a car accident it is very likely you will run into subrogation.
What is Subrogation?
When referring to an insurance claim, the definition of subrogation is the process an insurance company uses to collect money from the at-fault party to recover funds it has already paid. It’s a way to protect you and your insurance company from paying for car crash damages that weren’t your fault. In these situations, the insurance company steps into the shoes of the individual insured and assumes the legal right to collect a debt.
If you carry car insurance, known as first-party insurance, to cover your losses in a car accident, you may encounter subrogation after the crash. Examples of first-party auto insurance include:
- Personal injury protection and medical payments insurance that covers your injuries
- Comprehensive and collision insurance that covers damages to your car
- Uninsured or underinsured motorist insurance that provides protection if you are in a crash with a driver who has no or insufficient coverage
Does the At-Fault Driver Have Insurance?
If you are in an accident due to someone else’s negligence, the insurer of the at-fault driver, known as a third party carrier, would pay medical expenses and repair costs. A delay in claim payment often occurs when the fault for an accident is unclear and still under investigation. In some cases, the liability payment is delayed, and your insurance company steps in and helps you take care of the expenses. Your insurer recoups those costs through subrogation.
The first party and third party carrier typically handle the subrogation claim between them. If successful, you and your insurance company receive a refund for the funds advanced my your insurance carrier.
What Happens When the At-Fault Driver Has No Insurance?
Subrogation claims are processed differently when the at-fault driver doesn’t have insurance. The insurance company files a claim directly against the driver. It may begin when the insurer demands payment for reimbursement for damages. If that does not have satisfactory results, it may file a subrogation lawsuit. In situations where the fault is apparent, the insurer may be entitled to a monetary judgment equal to the amount paid out for the crash.
What If I Have Subrogation Claim Against Me?
The way you respond to a subrogation claim depends on whether or not you have car insurance. If you are insured, your auto insurance company is responsible for any subrogation action brought against you. You must notify your insurer if you are involved in a car crash, regardless of who is at fault. As a result, if you receive notification of subrogation, your insurer should already know about the accident.
Your policy should cover the claim against you, with the insurance companies resolving it in-house. You may not have any involvement in the action. Your insurer may simply pay the claim.
If you don’t have car insurance, you may have to hire an attorney and defend the subrogation claim. Most insurance companies will come after you for damages, regardless of whether you have an insurer. However, they often have a collections firm take care of the claim. These firms often will take less than the full amount and settle out of court. This is because they may not have a way to enforce a judgment and would have to have a collections company take action, such as attach a lien to any real estate or garnish your wages.
What Does Waiver of Subrogation Mean?
If you are settling with a driver or insurance company, it may involve a waiver of subrogation. This waiver prevents an insurance company from pursuing subrogation with the other party. For example, if your accident was due to another driver’s negligence, there may be an agreement between you and the driver or the driver’s insurance company to settle for a certain amount.
When you sign a waiver of subrogation, your insurance company cannot recover more funds from the other driver. This makes it imperative that the settlement amount is at least as much as you would get from your insurer. Your auto policy may have a disclaimer in the subrogation clause that prohibits you from signing a waiver. At the very least, insurance companies typically request notification from you before your signing of such a waiver.
What Happens If Fault Isn’t Clearly Defined?
If you aren’t entirely at fault, you may be responsible for paying some of the repair costs or damages. You can file a claim with your auto insurance company, pay the deductible and let the insurer take care of the details. Your insurance company could decide to subrogate the other party’s insurer to cover some of or all the costs. In that case, you may get some of or all your deductible back.
Having auto insurance protects you on the road and shields you from paying for car accidents that aren’t your fault. As a policyholder, you are typically not involved in a subrogation claim car accident.
The benefits of subrogation include:
- The insurer pays your claim quickly.
- You can be reimbursed for your deductible.
- The insurer takes care of the adjusters, lawyers and legal paperwork.
- You may enjoy lower premiums when the insurer recovers the payout of your claim.
The speed of the process depends on a variety of factors. If the fault is apparent, such as you were rear-ended at a red light, subrogation is relatively straightforward. The insurance company can typically make a strong case against the at-fault driver. If some drivers involved do not have insurance or have not acted in good faith, negotiations can take longer.
If you were the at-fault driver in a car accident, an attorney can help you understand the ramifications of a subrogation claim and how to handle the situation for the best possible outcome.
Subrogation matters can be confusing and complex, contact one of our experienced accident attorneys that could help answer your questions about subrogation.
This article is intended for informational purposes only and should not be considered legal advice.
Chris Costello, ESQ.
Chris handles matters in both New Jersey and Pennsylvania and is an active member of the New Jersey Association for Justice as well as the Burlington County Bar Association. As a Burlington County personal injury lawyer, Mr. Costello has served as chairman of the Burlington County Bar Association Personal Injury Committee and lectured on topics related to auto accidents and insurance law.
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