Subrogation: What It Is and How It Applies to Car Insurance

The term subrogation is not one that most people hear on a regular basis, and it refers to the paying back of a debt that was paid on someone’s behalf. While that may sound simple on the surface, this can become complicated when it comes to car accident insurance.

Most people have a general understanding of how car accident settlements work if they are involved in a crash caused by another person. Generally speaking, an insurance claim will be made against the at-fault driver’s insurance carrier to cover the damages sustained by the victim. However, actually getting rapid payment in the aftermath of a crash to take care of initial medical and other out-of-pocket expenses can fall onto the victim’s personal insurance carrier. If the victim in this case is awarded a settlement from the at-fault driver’s insurance carrier or in a personal injury lawsuit, subrogation is the process by which the victim’s personal insurance carrier will recoup their costs.

Generally defining segregation

Broadly, the word segregation means that one person stands in the place of another regarding a debt. When another individual or an entity pays a debt that is ultimately the responsibility of somebody else, then the person who paid the debt originally could be entitled to reimbursement from the person who owed the debt originally. That definition can certainly seem complicated, but subrogation is a common term used when it comes to car accident claims.

What really happens after an accident?

If you or somebody you care about is injured in a car accident caused by another person, then the responsibility for covering your injury expenses and other accident-related costs should ultimately fall to the at-fault party. However, car accident claims or personal injury cases that arise due to an accident may result in compensation not getting to the victim in the case very quickly.

Anybody who has been involved in an accident knows that they may need medical care and other assistance immediately. That is why car accident victims may need to turn to their own insurance carrier to pay for medical bills, household out-of-pocket expenses, lost wages, etc. In other words, your own insurance carrier will be paying a debt that is ultimately owed by somebody else (the at-fault party’s insurance carrier).

Written into most car insurance policies will be a subrogation clause of some kind. This means that, if your car insurance carrier pays the expenses really owed by the at-fault driver’s insurance carrier, then your insurance carrier will want to recover those costs from any insurance settlement or personal injury settlement you receive for the case.

If we use the following scenario, it may make subrogation a little more clear:

  • You are injured in a car accident caused by a driver impaired by alcohol.
  • Immediately following the crash, your personal insurance carrier pays $50,000 in medical bills on your behalf.
  • Two years later, you ultimately receive $150,000 in compensation through a personal injury lawsuit against the negligent driver.
  • Due to subrogation, your insurance carrier will likely be owed the $50,000 they paid to take care of your initial medical bills.
  • You will be left with $100,000 of the settlement, not the full $150,000.

It is important to speak to a skilled attorney about your case as soon as possible. An attorney will have a thorough understanding of any subrogation clause in your insurance policy and will be able to guide your case accordingly.