What Is Subrogation?

Subrogation in Car Insurance Explained

Two smashed cars by a guardrail after a collision.
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Subrogation is a process that allows your insurance company to work on your behalf when seeking compensation for losses in an accident that wasn’t your fault. The aim is to help you and your insurer reclaim the money spent. Read more to find out what subrogation is, how it works, and what it means to waive this right. 

What Is Subrogation?

Subrogation, also known as “subro,” involves your insurer taking on your legal right to sue the at-fault party to recover injury and property damage expenses from an accident that wasn’t your fault. In a car accident where the other party is at fault, their insurer—also called the “Third-Party Carrier” (TPC)—helps pay your repair costs and any medical bills. 

Your auto insurance company uses the subrogation process to recover the funds. The process also allows your insurance company to try to get further funding from the negligent party’s insurer to compensate you when costs are beyond your policy limits or to recoup deductibles you paid. 

Why Is Subrogation Important?

Subrogation is valuable because it helps keep premiums down by having the negligent driver and their insurer pay for accident expenses instead of your company. 

If the manufacturer of your car is responsible, your insurer may subrogate with them.

Subrogation is also beneficial because insurance providers can act as if they were you in the lawsuit. In most states, the suit is brought in your name or the company’s name. Without a policy, you’d be responsible for pursuing compensation from the other party or potentially paying additional fees to have a lawyer do so.  

How Subrogation Works

Subrogation is a part of the car insurance claims process, and is only used when needed and for eligible expenses, as per state law. If it’s needed, your insurance representative will let you know. They will take over the entire process, so you’re not likely to be an active participant. 

Subrogation starts with your insurance company paying for your damage and you paying your deductibles. Then, the insurance companies determine who’s at fault. After verifying that you’re not responsible for the accident, your insurer goes through subrogation to recover your deductible and other costs. Both you and your insurance company receive refunds in successful subrogations. If you’re partially at fault, whether you’re able to recoup any or all expenses depends on your state’s laws.

Keep your body shop invoice, credit card statement, or other proof that you paid your deductible. Your insurance company may request it as part of the subrogation process. Accident reports, pictures, and other accident records are also important when reporting claims.

How Long Does Subrogation Take?

Subrogation to recover deductibles takes six months on average, though it could be as fast as one or two weeks. Each claim is unique, and whether the subrogation process is quickly resolved or drawn-out depends on several factors. Here are a few common scenarios:

Insured other driver is 100% at fault: The subrogation process can be quick if the TPC doesn’t contest the claim.

Uninsured other driver is at fault: Subrogation in this case takes longer because there’s no TPC to work with and your insurer must sue the negligent driver directly.

Both drivers are at fault, or the fault is unclear: Determining fault in car accidents where it’s unclear or where both drivers are responsible can take time. In the latter situation, insurance adjusters may need to assign a percentage of blame to each party. Percentage of blame is crucial for subrogation because only partial costs or none at all may be eligible for recovery, depending on your state’s laws.

Subrogation in Action

Let’s say you’re badly rear-ended, and it’s the other driver’s fault. Although you don’t have injuries, your car sustains damage. You decide to file a claim with your insurance company so that you can use your collision coverage to get your vehicle repaired quickly. You pay your deductible, and your insurer covers the repair bill. In the meantime, both insurance companies work to verify who’s at fault. When it declares you had no responsibility in the accident, your insurer starts to subrogate with the other at-fault driver’s insurance company to get your deductible and other monies reimbursed.

In states with no-fault insurance laws, your insurer pays for your medical expenses regardless of who’s at fault. 

State laws affect how claim settlements are handled if you’re found to be partially at fault. In states like North Carolina, for example, you can’t recoup expenses if you’re found to be at all responsible, even if it’s as little as 5%.

What Is a Waiver of Subrogation?

A waiver of subrogation means you’ve signed a document stating your insurance company can’t pursue the at-fault party on your behalf to recover losses. The at-fault driver might bring it up if they want to settle the accident directly with you and cut your insurance company out of the picture. But talk to your insurance agent first because not all companies allow you to sign a subrogation waiver or interfere in any way with their efforts to recover expenses. Even if yours does allow it, it will ask that you notify your insurer before signing the waiver. That’s because once you sign the subrogation waiver, your insurer won’t be able to step in to help if something goes wrong.

Key Takeaways

  • Subrogation in car insurance occurs when an insurer acts in your name to recoup losses with the other party’s insurer (or directly with the other party, for uninsured drivers) in an accident that wasn’t your fault.
  • Losses eligible for coverage depend on state laws but may include deductibles, medical costs, and expenses exceeding policy limits. Eligibility to recoup costs may also depend on your percentage of blame. 
  • You may be able to waive your subrogation right if the at-fault party wants to settle with you directly, but signing a waiver of subrogation means your insurance company can’t fight on your behalf if things don’t work out as agreed.