What is subrogation?

Car accidents bring with them many expenses, from legal costs, to repairing or replacing your car, to medical bills, and even funeral costs. The party responsible for paying these costs changes depending on who was declared “at fault” in the wreck.

What is subrogation?Subrogation is the assumption by a third party of your legal right to collect debts or damages. But what does that really mean?

If you’re found to be not at fault in a car crash, the at-fault driver’s insurance company is legally obligated to cover your repair costs and medical bills. However, due to the lengthy legal process involved in collecting these damages, your own insurance company may need to step in to help pay for your car and healthcare costs. By entering into an insurance policy, you give your insurance company the right of subrogation over these costs. Subrogation allows your insurance company to recollect these costs from the at-fault driver’s insurance company. As part of the process, subrogation enables your insurance company to collect your deductible from the at-fault party’s insurance company, which they will then refund to you. If you’re not completely at fault, but do share some fault with the other driver(s) involved in the accident, your insurer may still be able to subrogate the other insurance company for some of your expenses.

What does the process of subrogation look like?

In short, the process of subrogation is when your insurance company steps into your shoes to take responsibility for any debts or damages owed to you by another party. For this reason, subrogation is usually a passive process for the policyholder. As you get the car repairs and healthcare you need, you should pay your deductible(s) and send all relevant documentation of your expenses to your insurer. Meanwhile, your insurance company will negotiate with the at-fault driver’s insurance. Your insurance company typically will start by sending a subrogation letter to the other insurance company which outlines all your vehicular and medical costs resulting from the accident. The companies will then legally negotiate to resolve your claims to damages. The companies have to mediate, whether outside or in court, details such as who is at fault and the amount of damages being claimed. For example, the at-fault driver’s insurance policy limit may be lower than the money needed to cover your car’s repairs. In this case, your insurance company may not be able to recover all your costs, thus you may not be refunded your entire deductible.

Although subrogation may take weeks, months, or years to complete, if your insurer is successful in collecting their claim against the other insurance company, you will eventually have some or all of your deductible refunded to you. All policyholders should receive a letter from their insurance company at the end of this process notifying them of the settlement the insurance companies reached.

At the end of the day, even if you have a great relationship with your insurer, you must protect your own interests. For example, our firm often helps clients when their health insurance companies will not pay for some or even all of their medical expenses. It’s almost always beneficial to use your health insurance, but you may have to enlist the help of an attorney during the subrogation process to ensure that your insurer is still covering your costs while they negotiate with the at-fault party’s insurer.

What if I’m declared at-fault?

What does the subrogation process look like for the at-fault driver? The at-fault driver’s insurer will largely handle the process of subrogation. So, if you receive a subrogation letter from the other driver’s insurance company, be sure to send it to your own insurance agent right away. Continue making your monthly insurance payments as usual and be sure to stay in communication with your insurance company.

What does a waiver of subrogation do?

In certain situations, you might consider signing a waiver of subrogation. This is a contractual provision within your insurance policy wherein you can waive your insurance company’s right to collect damages on your behalf. This prevents your insurer from suing the at-fault driver’s insurance company, and thus exposes your insurance company to greater risk. Because of this risk, many insurance companies require policyholders to notify them when they sign a waiver of subrogation, or even charge an extra fee to include a clause about waiving their right to subrogation in your policy.

A waiver of subrogation may sound intimidating, but there are cases wherein signing a subrogation waiver may be to your benefit. For example, the at-fault driver may be interested in settling the damages caused by the wreck outside of insurance in order to prevent their monthly premium from increasing. In this case, you may sign a waiver of subrogation to settle the case without your insurance company. In the case of a wreck with an uninsured or underinsured motorist, waiving subrogation may help you receive reimbursement for your damages faster, with less legal hassle. Be sure that you consult with your insurance company and read your insurance policy carefully before signing a waiver of subrogation, though. You may be denied coverage or charged a fee by your insurance company by waiving subrogation, thus waiving subrogation may expose you to greater risk as well.

If you’re considering waiving subrogation after a car crash, reach out to an experienced personal injury attorney to ensure you receive the settlement you deserve. Our personal injury team, spearheaded by attorney Zack England, is skilled in defending the rights and interests of automobile accident survivors. Let us handle negotiation with the at-fault driver and/or their insurance company, so that you can focus on healing. Call us at 423.693.2378 or fill out our online contact form to get started restoring your life.