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Car Insurance Subrogation: A Guide (2023)

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A subrogation clause is an important part of any car insurance policy. It allows you, the policyholder, to take the back seat during the claims process. Best of all, when subrogation is available, you can get your claims payout fast and let your insurance company take care of everything else. In this article, we cover all the important details about the subrogation process.

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Quick Facts

  • Subrogation gives insurance companies the right to reclaim insurance losses from a third party.

  • Most of the subrogation process unfolds without much action required from the insured.

  • Insurance providers usually cover costs for their customers right away and then seek repayment from the at-fault party’s insurance company.

Subrogation 101

What is an example of subrogation?

If your bumper is damaged when you’re rear-ended, your car insurance company covers those damages directly. Then, it works with the other party’s insurance company to reclaim its losses.

Subrogation is the legal right held by an insurance company that allows the company to pursue the recovery of an insurance loss from a third party. It’s what gives your insurance company the right to act on your behalf in reclaiming losses. In other words, subrogation gives the insurance provider the right of recovery within the legal process connected to the incident.

In terms of car insurance, subrogation gives your insurance provider the ability to legally pursue the person at fault for an accident that caused a loss to you, the insured. The company is allowed to pursue the other person—and their insurance provider—for reimbursement of losses and no more than that.

It’s important to remember that the way that the subrogation process affects you varies based on your insurance provider and the wording in your insurance policy. Always review your paperwork carefully, especially when you need to make a claim.

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How it Works

The subrogation process is managed almost entirely between insurance companies. Both are acting on behalf of their insureds. Details of the subrogation process your insurer follows should be outlined in your policy documents. Still, it’s always a good idea to stay in close communication with your provider during any claims process.

Let’s take a look at an example of subrogation. You’re rear-ended in a minor fender bender. You provide photographs and important information to your claims agent. Then, an adjuster may visit to examine the damage and give an estimate. Your insurance provider cuts you a check to cover those damages, and you get your car repaired.

Your insurance provider then goes to the other car insurance provider to receive reimbursement for that payout, which it receives. The other driver will pay their deductible. If damages exceed insurance coverage limits of the other driver’s policy, then your insurance provider will need to get reimbursement from the other driver directly.

If you paid a deductible to your insurance company when you initially received reimbursement, you may be entitled to getting your deductible back once your insurer has received compensation from the third party.

When Fault is Unclear

In most cases, when no one is found to be fully at fault, reimbursement and penalty are assigned based on the percentage of fault each driver is determined to have. For example, during the claims process, it may be determined that you hold 20 percent of the fault. You’ll then be responsible for covering 20 percent of your damages.

But we should note that subrogation law and the process by which fault is designated differ from state to state. In some states, no one can be found at fault for minor personal injuries and medical bills. In other states, the person found to be most at fault must pay 100 percent of the damages. If you have concerns, you can contact your insurance agent and an attorney.

When no one is at fault, the subrogation process is less straightforward. If you have collision coverage, you’ll have more protection during the claims process, no matter who is at fault. You can file a collision claim with your insurance provider and let your provider pursue legal action to recover losses from the other driver.

While that can result in paying higher costs for car insurance for a few months, if it means getting back on the road sooner, it may be worth it.

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When Subrogation is Denied

There are some common situations where you might be denied subrogation—a.k.a. your claim is denied. Most of the time, it is due to an issue with how your insurance policy was set up. Here are some common examples:

  • You’re not a “named insured” on the car insurance policy.

  • You submit for damages that are not covered by your policy (e.g., a collision claim for a liability insurance policy).

  • You provided inaccurate information during the application process.

  • You didn’t report the accident to the police (i.e., insufficient evidence).

  • You were under the influence during the incident.

  • You’re pursuing injury claims in a no-fault state.

If you’re denied, you should review your insurance contract and policy documents, gather evidence, and speak with an attorney. You may be able to prove your right to make a claim without going through the legal system, so long as you provide enough evidence. Otherwise, you’ll need to prove in court that you were unreasonably denied your claim.

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Waiver of Subrogation

Waivers of subrogation are a policy endorsement that prohibits the insurance company from acting as a third party for the insured. A clause that restricts the insurance company’s rights to recoup its losses puts the company at great financial risk. For this reason, waivers of subrogation are expensive and not typically written into personal auto insurance policies.

However, if you are the victim in a car accident, the responsible party may offer to settle the damages without involving your insurance company. To do so, you would need to sign a waiver of subrogation. This is a document wholly separate from your auto policy, and they are not always appropriate. Signing one can leave you at great financial risk.

If you’re presented with the option to sign a waiver of subrogation, speak with both your insurance agent and an attorney. Be sure you fully understand the consequences of the waiver and your other options before you sign.

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Choose an Insurance Company with Excellent Customer Service

Filing an insurance claim is stressful. Working with an excellent customer service team makes the claims process easier. Many drivers focus entirely on the cost of their car insurance. Ease of use—like managing the claims process online—can make a big difference to you, but not to your pocketbook. Find a balance between cost and getting the best car insurance company for you.

Here’s a list of several car insurance companies known for offering great claims services:

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Frequently Asked Questions

  • To oppose subrogation, you need to take action. Ideally, you’ll have evidence to contradict your fault in the accident. That can be anything from photographs to eyewitness accounts. You can bring your evidence to your claims agent and allow your insurance company to challenge the case for you. If you don’t have an insurance company, you’ll need to work with a lawyer.

  • Recoupment is the recovery of money that was unnecessarily paid out. The term is broad and can apply to other forms of recoupment (cash, trade, etc.) to any loss. Subrogation is a legal pathway that allows an insurance company to seek recoupment from an at-fault third party and the third party’s insurer to cover the costs of paying out a claim.

  • Subrogation is a good thing. It makes things easier for drivers who are not at fault for a car accident. And it also makes things easier for drivers who are at fault. It keeps the claims process simple and fast, which keeps car insurance rates lower than if the process had to be managed by the drivers.

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JJ Starr
JJ StarrInsurance Writer

J.J. Starr is a health and finance writer with a background in banking, lending, and financial advising. She holds a Series 6, FINRA, and life insurance licensure and a master's degree from New York University. Through her writing, she strives to use her decade of experience to help consumers make sound financial choices. Connect with J.J. on LinkedIn.