What Is a Subrogation Claim and How Do You Fight It?

Often when you file a claim after a car accident, the insurance company pays your damages up front. That can include things like your car repair costs, medical bills, and lost wages if you missed time from work. But the insurance company doesn’t rely on the money you paid in monthly premiums to cover those losses. Instead, they’ll try to make the at-fault driver’s insurer reimburse them for those costs. So, what is a subrogation claim, and does every insurance policy include a subrogation clause? And how might the subrogation process affect your settlement amount down the road?

Keep reading to learn how subrogation works, regardless of whether you’re the responsible party or the injured victim.

Understanding How Subrogation Claims Arise: Key Takeaways

• A subrogation claim allows an insurance company to seek reimbursement from the at-fault party after paying to settle an accident case.
• The subrogation process helps insurance companies recoup any expenses paid on an insured person’s behalf to settle cases that involve injury, death, or property damage.
• Subrogation only works if the party responsible for causing your accident has insurance or the ability to cover your financial losses.
• The subrogation process affects more than 1 in 5 motor vehicle accident cases (21.5%) after an injury occurs.
• Insurers recover about 15% of annual losses from personal injury cases through subrogation (also known as “subro”).

What Is a Subrogation Claim?

A subrogation claim allows your insurance company to recover money it paid towards your accident costs directly from the responsible party’s insurer. In plain English, here’s how that typically works if you’re hurt in a car wreck and aren’t at fault:

1. You notify your insurance carrier that another driver struck your vehicle and you wish to start the claims process.
2. Provided you have enough coverage, your policy covers the cost of vehicle repairs and medical expenses, minus your deductible.
3. Your insurer can then request reimbursement from the at-fault driver’s insurance provider by submitting a subrogation letter.
4. If the subrogation process is successful, then you may eventually get your deductible money back.

This legal process ensures any policyholder filing an insurance claim gets financial compensation in a timely manner. Then, the policyholder’s insurance company seeks repayment of those funds from the other party’s insurer directly. The more successful insurers are at subrogation, the less likely they are to cancel your coverage or raise your premium rates.

Types of Subrogation Claims and Common Scenarios

Not every insurance policy includes a subrogation clause, but they appear most often in coverage for the following areas:

• Automobiles and other vehicles
• Healthcare coverage
• Renter and homeowner’s policies
• Workers’ compensation

Property Damage Claims

If another person’s negligence damages your property, you should not have to bear the financial burden of replacing it. Here’s an example of how this process might work if someone borrows your car and wrecks it:

1. Your brother, Robert, takes your Volvo out and parks on an incline, but fails to use the emergency brake.
2. The car then rolls backwards down a hill, eventually slamming into a tree.
3. Your brother tows the car to a nearby body shop and gives you his insurance policy information.
4. You notify your insurer, including that the insured party responsible for the damage is your brother. You also provide the other insurance company’s contact information and relevant policy number.
5. Your claims adjuster pays for the repair costs, then files a subrogation claim with your brother’s insurance carrier.
6. The two insurance providers come to a fair resolution, so you get your deductible back.

Auto Accident Injury Claims

As we mentioned in our key takeaways, subrogation helps insurers recoup losses in more than 20% of car accident cases. Many times, the injured party filing a car accident claim also has their own health insurance. Here’s an example of how a subrogation claim might work in this scenario:

1. Another driver rear-ends you while stopped at a light.
2. You go to the doctor with neck and back pain, suspecting whiplash.
3. Your health insurance company pays for 80% of your doctor’s visit, x-ray, and MRI.
4. Once you accept a settlement offer on your claim, your health insurance carrier can seek reimbursement for those medical expenses.
5. Your health insurance policy includes a subrogation clause.
6. This allows your health insurer to go after the responsible driver’s car insurance company to recover those costs through subrogation.

In this example, subrogation stops the claimant from receiving payment twice for the same expenses.

What if Your Own Insurer Files a Subrogation Claim Against Another Driver?

How your insurance provider pursues reimbursement from the at-fault driver depends on whether that person’s insured or not.

If the At-Fault Driver Has Car Insurance

This is what you want, because it means all the negotiating and paperwork happens behind the scenes without your involvement. Here’s an example: Jenny T-bones you while turning left at an intersection, but you didn’t have a protected arrow. You call your Allstate insurance agent, John, to report the wreck and start the claims process. Allstate cuts the dealership a check to fix your body damage, and covers 6 weeks of PT for your broken arm. With your claim closed, now, it’s time for them to seek repayment for your settlement.

Since Jenny (the driver who struck you) has Liberty Mutual insurance, John at Allstate files a subrogation claim with her agency. The investigation finds Jenny 60% at fault, while you’re 40% at fault. After several letters and negotiations, Allstate recovers most of your damages from Liberty Mutual. If they’re successful, Allstate is legally required to refund your deductible. But if Liberty Mutual refused to pay, then the two agencies may have to resolve the issue in legal proceedings.

If the At-Fault Driver Doesn’t Have Insurance

Things get a lot more complicated if the at-fault driver isn’t insured. At that point, the victim’s insurance company can only pursue the driver herself (Jenny in our example) to request reimbursement. To do this, John at Allstate would have to file a claim directly against Jenny. First, Allstate might send Jenny a demand letter via registered mail to demand the money they paid to settle your claim. If that didn’t work, they would then file a claim directly against Jenny in court.

How to Defend Yourself Against a Subrogation Claim

The process for handling these claims can vary, depending on your status as an insured or uninsured driver.

When You Have Insurance

Step one is to contact your insurer and notify them immediately about your subrogation letter. In fact, your insurance contract likely requires you to alert them to any subrogation efforts in a timely manner.

After that, you likely won’t hear back for a while unless your own insurance provider needs more information from you. Their goal is to prove that you did not cause the accident, which would legally relieve you of any financial responsibility. Once it’s resolved, the insurer should send you written notice notifying you of such action.

When You Don’t Have Insurance

If you’re at fault and aren’t insured, the subrogation process looks quite different. First, not having insurance won’t stop the company who settled a claim based on your negligent actions (or inactions) from coming after you. They want their money back, and they will use every legal tactic within their power to try and recover it from you.

First, expect a demand letter to show up in the mail asking for payment. Seeking legal advice before you respond would be a wise move, since most car wreck attorneys offer free consultations.

If you don’t respond to initial recollection attempts, the insurance company will continue to seek reimbursement by taking legal action. You can potentially settle for significantly less money than you owe if you hire legal representation to handle those negotiations. This is because insurance providers know winning a judgment in court is a lot easier than collecting any money they’re owed.

Should You Ignore When an Insurance Company Files a Subrogation Claim Against You?

Absolutely not, and doing so (even on accident) won’t make the problem go away. Doing so could lead to legal action against you, and that could escalate the situation further. Your best bet is to request a free consultation with an auto accident attorney familiar with the laws in your state.

An attorney can offer the following benefits in your subrogation case:

• Gathering evidence that supports your side of the story, including witness statements or traffic camera video
• File any paperwork related to your claim within your state’s required deadline
• Negotiate a lower payoff amount to settle your claim
• Help you avoid debt collectors, wage garnishment, and other potential damage to your finances (i.e., your credit score)

Can You Waive Your Subrogation Rights?

You can, but it requires an endorsement from your insurance company to do so. This is commonly called a “waiver of subrogation.” This legal document prevents your insurance provider from trying to recover expenses from the a-fault party on your behalf.

In some cases, the at-fault driver might offer to pay for your accident costs if you agree not to file an insurance claim. When this happens, that person (or their attorney) might ask you to sign a waiver of subrogation to receive your payment. But once you do this, you lose all legal rights to sue the at-fault party or have your insurer go to bat for you. If you decide to go this route, it’s important to notify your insurance company before you sign that waiver.

How Often Are Subrogation Claims Successful?

According to industry data from Verisk, insurance companies recovered about 16.7% of auto collision losses in 2020 through subrogation. That’s because with very straightforward clear fault cases in certain states, recovery can soar to 80%-100%. But more complex cases with multiple parties sharing fault can skew that average down to 50% or even less. On average, it takes 9-12 months to close a claim.

Talk to An Auto Accident Attorney About Your Issue for Free

Can’t find the right auto attorney for your case or not sure where to look for one in your state? LegalASAP can connect you with a nearby auto accident lawyer for a free consultation today. Responding promptly and good quality legal counsel can dramatically reduce any money you pay to settle a subrogation claim.

We’re an attorney referral network connected to hundreds of law firms located nationwide. Finding out whether you may qualify for legal assistance with your claim takes just a few minutes. And since all car accident lawyers work on contingency, you have nothing to risk or lose.

Fill out this short evaluation form or call 1-888-927-3080 to call one of our representatives now to get the help you deserve.