The Subrogation Process: What Is It and Why Is It Important?

How Does Subrogation Facilitate the Payment of Insurance Claims?

When you are involved in a motor vehicle accident and you have insurance, your insurance provider will typically cover the costs of damage to a vehicle and any medical treatment required because of the crash. However, if the accident was caused by the carelessness or negligence of another party, your insurance company will have a claim against the at-fault party to recover any claims paid. This is through a legal process known as subrogation. What is subrogation? Why is it so important to the insurance process?

What Is Subrogation?

Subrogation rights are exercised by an insurance company when an insured has a covered loss caused by the carelessness or negligence of a third party. Under the insured’s policy, the insurer has a duty to pay for covered losses, within policy limits and provided policy requirements are met. However, the insurer also has the right to seek reimbursement of any payouts from the party whose negligence caused the damages. Generally, instead of seeking reimbursement from the at-fault party, the insurer will seek payment from the at-fault party’s insurance provider. In essence, subrogation allows your insurer to take over your personal injury claim.

What Does Subrogation Look Like?

In most instances, the subrogation process will be completed with little or no involvement on your part. If you are involved in an accident, and it’s determined that you meet policy requirements for coverage, your insurer will give you a check for your losses, minus any deductible on your policy. If the insurer concludes that your losses were caused by the wrongful acts of a third party, your insurer will then seek reimbursement from that third party. Typically, the third party will turn that claim over to their insurer, and the insurance companies will resolve the matter directly.

You may be interviewed about the details of the accident, and you may even have to appear as a witness at trial if the insurance companies cannot reach agreement, but you won’t have to wait until the subrogation matter is resolved to get your payout. Your insurer will pay you first and then seek reimbursement. In some situations, your insurer may be able to get the other insurer to pay sufficient damages to allow for the reimbursement of your deductible.

Why Is Subrogation Important?

The principle of subrogation streamlines the insurance process, so that parties don’t have to incur both the time and expense of protracted litigation to resolve a coverage dispute. Because your insurer has the right of subrogation and will potentially be reimbursed for covered losses, your insurer is willing to make a payout up front. The right to subrogation also minimizes potential losses by your insurer, keeping premiums down.