What is Subrogation?
You might hear the term “subrogation” when dealing with an insurance claim in Texas. Subrogation is a common word in the insurance industry, but as a claimant, it might be a new concept to you. All types of insurance claims and policies can involve subrogation. This process serves to reimburse your insurance company for a payout it gave to you, the claimant. It could potentially result in payment of your out-of-pocket expenses after an accident as well. Find out if subrogation might play a role in your insurance claim – and if so, what this might mean for you.
Defining Subrogation from an Insurance Lens
It’s important to learn about subrogation in any insurance claim so that you can understand how your company might use it to recover some of its costs. Subrogation is the legal right of one party to make a payment that another party actually owes, and then to collect money from the party that originally owed the debt after the fact. From an insurance perspective, subrogation works like this:
- You get into an accident and file a claim with your company for compensation.
- Your insurance company pays you a settlement to cover your damages.
- An investigation uncovers that an auto part manufacturer was actually at fault for your accident.
- Your insurance company seeks reimbursement through the at-fault party’s insurance company.
- The product manufacturer’s insurer pays your insurance company what your insurer paid you.
Subrogation may result in payment for any out-of-pocket expenses you paid to your insurance company, such as deductibles. Since your insurance company received payment for your accident, you will not owe the company any money. The law obligates your insurance company to let you know if it is attempting subrogation. The law also requires that the insurer try to recover your costs and pay them to you if it is successful.
What Is Your Role in Insurance Subrogation?
A claimant generally cannot interfere with an insurance company’s attempts at subrogation. Most insurance policies have clauses that require claimants to cooperate with the insurer’s attempts to recover paid damages. This means it will be a breach of contract for you to sign a waiver, for example, releasing the at-fault party from liability. If you receive a notice that your insurance company is attempting a subrogation, wait until the company resolves the issue.
If an investigation finds you were partially at fault for your accident, your insurer will pro-rate the amount of your deductible that you recover by an amount that’s equivalent to your percentage of fault. For instance, if an investigation deems you 10% at fault and your insurance company subrogates your claim, you’d receive 90% of your deductible refund. Before you sign settlement offer from an at-fault party’s insurer, read it carefully. Do not sign if it includes a waiver of subrogation, which can prevent your insurance company from receiving reimbursement.
Will Your Insurance Claim Involve Subrogation?
Not all insurance claims will require subrogation. If an investigation identified an at-fault party prior to your insurance company paying you, you will seek coverage directly from the at-fault party’s insurer, not your own. Subrogation will only be applicable if your insurance company pays you a settlement and then later seeks to recover the money it paid from the at-fault party in the accident.
Subrogation can be helpful to claimants if an investigation is taking a long time to complete. While the investigation is underway, you can receive prompt payment from your insurer instead of having to wait. You can use your insurance money to pay for medical bills, treatments, care, lost wages, property repairs, and other losses while the insurance company or the police get to the bottom of who or what caused your accident. Then, your company gets reimbursement from the at-fault party later. Talk to a Houston insurance bad faith lawyer if you have any questions about subrogation.