Subrogation: What It Is and How It Might Impact Your Personal Injury Claim

Subrogation claims

Find out what to do if a notice of subrogation letter shows up in your mailbox

Subrogation refers to the act of one person or party standing in the place of another person or party. Find out how subrogation can impact your personal injury claim and damages award.
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If you’ve been injured in an accident or if you’ve taken on the Herculean task of reading through your auto insurance policy, you’ve probably come across the term “subrogation.”

Subrogation sounds intimidating, but it’s actually a fairly simple (albeit important) concept.

Let’s take a closer look at how it works and what you need to know to protect your rights.

What is subrogation?

Subrogation is a legal term used to describe an instance in which one party assumes a legal right held by another party.

Typically, subrogation occurs when an insurance company pays its insured and then seeks reimbursement from the party who caused the insured’s injuries.

Let’s look at an example of subrogation playing out in a car accident case:

Linda’s Ford Pinto is damaged when Bob runs a red light and crashes into the side of the Pinto. Linda files a claim with her auto insurance company for $10,000. Linda’s insurance company promptly pays the claim so Linda can have her vehicle repaired.

However, Linda’s insurance company shouldn’t be out $10,000 because Linda wasn’t at fault for the accident. What’s more, Linda shouldn’t be allowed to sue Bob for $10,000 because she already received $10,000 from her insurance company.

Subrogation allows Linda’s auto insurance company to step into Linda’s shoes and sue Bob (or his insurer) to collect the $10,000.

How might subrogation impact my settlement or judgment amount?

If you’re injured in an accident, you might consider filing an insurance claim and suing the at-fault party.

Keep in mind, however, that if you win your case, subrogation requires that you repay the portion already paid by your insurance company.

Consider the following example:

Nicole is hit by a drunk driver while bicycling to work. Nicole suffers a serious leg injury that requires immediate surgery at a cost of $50,000. Nicole has health insurance which pays for the surgery. Nicole also has bike insurance, so she files a claim and is awarded $10,000 for the bike.

A month later, Nicole sues the drunk driver. She settles her case for $150,000.

Although Nicole is pleased with the settlement, she won’t be taking home all $150,000. She’ll first need to reimburse her health insurer for the treatment they paid for (i.e., $50,000). She’ll also need to pay her bike insurer ($10,000), and of course, she’ll need to pay her attorney.

How long does an insurance company have to file a subrogation claim?

States limit the amount of time individuals and companies have to file lawsuits. This time limitation is called the statute of limitations. If an insurance company fails to file a subrogation lawsuit within the statute of limitations, the insurance company will be forever barred from filing the lawsuit.

Exactly how much time an insurance company has to file a lawsuit based on subrogation depends on the state and the nature of the accident.

What is the anti-subrogation rule?

Generally speaking, the anti-subrogation rule prohibits an insurer from asserting a right of subrogation against its own insured for a claim arising from the risk for which the insured was covered.


Consider the following real case:

Real Life Example:A Chevrolet dealership loaned a vehicle to David Africk while servicing his vehicle. David left the lot and immediately damaged the loaned vehicle in a single-vehicle collision.

The Chevrolet dealership’s auto insurer (Motors Insurance Corp.) paid the Chevrolet dealership’s claim for the damage and then brought a subrogation lawsuit against David to recover the amount it had paid.

David refused to pay and the court ultimately dismissed the lawsuit. The court reasoned that David had permission from the Chevrolet dealership to drive the loaned vehicle and was, therefore, a “permissive user.” Under the Chevrolet dealership’s auto insurance policy, the insurer agreed to pay for "loss to a covered auto caused by . . . collision with another object."

As the court explained:

“The insurer is seeking recovery from a permissive user, authorized by its insured, for a claim arising from the very risk for which the insured was covered, an outcome barred by the anti-subrogation rule.”

Let’s look at another example:

Real Life Example:Charles White purchased auto insurance from Allstate Insurance Company. Charles, who owned Precision Painting, was then hired to paint a house that was covered by Allstate under a homeowner’s policy.

Charles burned down the house. Allstate paid the claim and then filed a subrogation lawsuit against Charles. Charles raised the defense of anti-subrogation.

The court found that subrogation was permissible against Charles because the claim did not arise from the risk for which the insured was covered. In other words, Charles wasn’t an insured individual on the homeowner’s policy, just the auto insurance policy which wasn’t impacted.

What is a waiver of subrogation?

A waiver of subrogation is an agreement that prevents your insurance company from acting on your behalf to recoup expenses from the at-fault party.

A waiver of subrogation comes into play when an at-fault driver wants to settle an accident without the involvement of your insurer.

Once a waiver is signed, your insurance company won't be able to act on your behalf if something goes wrong since you've waived its right to do so.

Most insurance companies ask that you notify them before signing a waiver of subrogation.

Still confused about subrogation?

In most cases, you won’t have to worry too much about subrogation. Most of the time, everything happens behind the scenes between the partys’ insurance companies.

With that being said, if you have questions about your legal rights with respect to subrogation, use our free online directory to contact a personal injury attorney near you.


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