What is subrogation? | Washington state Office of the Insurance Commissioner (2024)

FAQs

What is subrogation? | Washington state Office of the Insurance Commissioner? ›

When you file a claim, your insurer can try to recover costs from the person responsible for your injury or property damage. This is known as subrogation. For example: Your insurance company pays your doctor for your treatment following an auto accident that someone else caused.

What Is Subrogation? “Subrogation” refers to the act of one person or party standing in the place of another person or party. It is a legal right held by most insurance carriers to pursue a third party that caused an insurance loss in order to recover the amount the insurance carrier paid the insured to cover the loss.

Subrogation claims are when an insurer seeks to recover accident costs (e.g., medical expenses, property damage, etc.) from the at-fault driver because they made underinsurance or underinsurance payments because the at-fault driver did not have any (or enough) insurance to cover the claim.

If you receive a subrogation letter, talk to your personal injury attorney about the potential outcomes for your case. Find out which factors make your case a good one to pursue. The laws in your state and the terms of your health insurance determine whether a lawsuit is worth your time and effort.

In insurance terms, subrogation is a legal action that an insurance company (the insurance carrier) takes to recoup the funds paid out in a claim from the at-fault party. This allows the insurer to adopt the legal right of the injured party to seek reimbursem*nt, preventing unjust enrichment.

Subrogation provides a way for your insurance company to seek reimbursem*nt from the other driver's insurance company. In addition, recovering costs from the at-fault driver's insurer can help your insurance company keep costs low for its own policyholders because it reduces how much they pay out for claims.

A subrogation claim is not going to go away on its own. If you ignore the letter, the insurer will file a lawsuit against you, the party being held responsible, and the insurer will win, almost every time.

A subrogation claim is generally considered a “tort” – not a “debt”, so it has been found by the courts as not subject to the FDCPA.

Subrogation does not affect credit scores or credit reports directly. Subrogation is a process where an insurance company seeks to recover funds from an at-fault third party after making a claim payment to a policyholder for damages resulting from a car accident. The process is generally separate from credit scoring.

Do insurance companies always pursue subrogation? ›

Important note: Insurers aren't obligated to pursue subrogation, but some states require insurers to inform their customers when they decide not to. Customers in those states may then attempt to recover their deductible on their own.

Insurance companies can utilize this letter template to seek reimbursem*nt from the person or entity legally responsible for a loss, after already paying their own insured for the damages.

At the minimum, your subrogation file should contain all elements corresponding to liability determination and proof of damages. Being able to prove who is at fault is essential. You'll want to include documentation and any information you've gathered, such as witness statements or police reports.

One example of subrogation is when an insured driver's car is totaled through the fault of another driver. The insurance carrier reimburses the covered driver under the terms of the policy and then pursues legal action against the driver at fault.

The most common type that can be subrogated is property damage claims. For example, if you are involved in an auto accident where no one is injured, but the vehicles are damaged, and you are free of fault, your insurer will pay to have your vehicle damage repaired.

Subrogation refers to the practice of substituting one party for another in a legal setting. Essentially, subrogation provides a legal right to a third party to collect a debt or damages on behalf of another party.

When factoring comparative negligence and improper referrals, the recovery rate should be somewhere in the range of 85-90%.

Business owners often agree to waivers of subrogation clauses if they see that to do otherwise would result in lengthy litigation that would cause even greater financial losses due to the need to halt projects until any lawsuit is settled.