Subrogation is a legal right that allows your insurer to pay for your damages before pursuing the responsible party to collect the debt it’s owed.
What is subrogation?
When you weren’t the at-fault driver in an accident, subrogation protects you and your insurance company from having to pay the medical bills and other expenses of a car accident. It assigns those expenses to the at-fault party and allows your insurance company to recover money from their insurance company.
A subrogation clause is one of the more complicated parts of how car insurance works. It’s built into most insurance policies and it allows an auto insurance company to step in and assume the insured’s rights in order to help them get reimbursed.
Subrogation clauses are common in homeowners and health insurance contracts, as well as in car insurance (which is what we’ll be discussing here).
How does the insurance subrogation process work?
After you’ve been in a car accident and filed an insurance claim, your insurance carrier determines the at-fault party.
Even if you plan on taking legal action instead of filing an insurance claim, you should still notify your car insurance company that an accident happened. If you waive some of your rights, it could prevent them from helping you later (see below for more on this topic).
If there’s a question about who is the at-fault party, you may have to pay your deductible and go ahead with your own car repairs while it’s being investigated. You’d also have to pay any medical bills not covered by your health insurance.
If your insurer determines that you’re either not at-fault, or only partially at-fault, they could decide to subrogate to the other policyholder’s insurance provider. (That’s a complex way of saying “get them to pay for it.”) Or, if the other policyholder’s insurer pays you back slooooooowly, your insurer can step in to handle your damages and then invoke the right of subrogation to speed things along.
The good news is that filing a subrogation claim happens behind the scenes—you don’t have to do anything. If your insurance company’s claim is successful, they could receive a reimbursement for some of the accident’s costs. And depending on your state’s laws, you could receive a reimbursement for part of all of your deductible.
What are waivers of subrogation?
Let’s say the at-fault party asks you to not file an insurance claim, and deal with them directly instead. If you agree, they could ask you to sign a waiver of subrogation. Waiving the right to subrogation prevents your insurance company from later trying to recover money from the at-fault party.
Before signing any waivers of subrogation, you should talk to a lawyer or discuss with your insurance carrier. Once it’s signed, you’ve waived an important legal right, and your insurance company’s hands are tied if something goes wrong. Because of this, many car insurance companies ask policyholders to notify them before signing waivers of subrogation.
Wait, I thought Subrogation was a sci-fi movie about a war between Bio-Borgs and Crustaceans??
Hey, you shouldn’t believe everything you read on the Lemonade blog…
A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage and discounts may not be available in all states.
