What is Subrogation?

Subrogation – it’s a large, frightening word that most of us are not familiar with. It is the legally established right that permits a party to make payment on a claim for damages that is actually owed by another party and allows them to collect the money from the party who actually owes the debt at a later time.

The entire insurance industry is erected around the legality of subrogation claims and could not function efficiently without it.

The most common type of claims that are subrogated are property damage claims specifically related to automobile accidents.

While every citizen in the State of Nebraska who owns and operates a motor vehicle is required to hold a policy of insurance on said vehicle, most people are not acquainted with this type of claim because it is generally something that happens only between insurance companies.

Let me give you an example of an auto accident subrogation claim. Let’s say you are involved in a car accident where no one is injured but there is damage to both vehicles involved. While the accident was not your fault, your auto insurance company will pay for the repairs your vehicle requires after you have paid your deductible, if any.

Your insurance company will then make a claim against the at-fault party involved in the accident in order to recover the cost they paid to repair your vehicle. This is subrogation in action. Basically, your insurance company fronts the money to repair your vehicle on the principle that they will be able to collect the money from the party who caused the damage to your car.

It is during the process of subrogation, by law, that your insurance company is required to at least attempt to recover the cost of your deductible, if applicable. If your insurance company is successful in recovering your deductible from the responsible party, it must be refunded back to you.

It is normal practice that anytime you file an insurance claim where another party is at fault, your insurance company will usually pay your claim to cover your damages. The company will then seek to recover all or a portion of the money they paid from the at-fault party.

Because fault is regularly determined through a rigorous and thorough investigative method, the ultimate decision regarding who owes whom takes some time to come to fruition. If a claimant cannot wait to be paid, the insurance company will pay the claimant for the damages full well knowing it can recuperate any costs incurred at a later date through a subrogation claim.

Sometimes during the subrogation claim process, your insurance company may find you partially at-fault. If this happens, the amount of your deductible you can recover is prorated according to the percentage you are at-fault. For example, if you are 30% at-fault, you are entitled to recover 70% of the deductible you paid to your insurance company.

Sometimes insurers will include a “waiver of subrogation clause” into an agreement in order to prevent your insurance company from attempting to get repayment of the money that it paid out to you. If you waive subrogation after an accident, your auto insurance company may refuse to pay your claim because they will not be able to seek
reimbursement from the other driver’s insurance company. For questions regarding subrogation, contact an attorney at our Sioux Falls, Sioux City, or Omaha office today.