Understanding Subrogation


What Is Subrogation? It is a term used to describe the liberty held by most insurance entities to lawfully go after a third party that induced an insurance loss to the insured. This is performed in a bid to recoup the percentage of the claim paid by the insurance firm to the policyholder for the damage.

When an insurance company goes after a third party for damages, their role now becomes like that of the policyholder and they will have the same privileges and lawful position as the policyholder when pursuing reimbursement for losses.

An insured person who claims reimbursement from their insurer, cannot go after the third party for reimbursement as well, only the insurance company can.

The insurance company must inform the policyholder if they will be subrogating their claim.

How Subrogation Works

Subrogation effectively establishes the rights of the insurance organization prior to and after it has paid claims rendered against a policy. It allows collecting a settlement under an insurance policy to flow.

In most instances, an individual’s insurance firm pays them for their claim of losses directly, then pursues reimbursement from the third party, or their insurance entity. 

The insured client obtains payment rapidly, then the insurance company might seek to make a subrogation claim against the party responsible for the loss.

Insurance policies may state that the insurer is entitled to pursue reimbursement from the third party, should they be at fault, once they’ve said their policyholder.  

In the insurance world, particularly auto insurance, Subrogation occurs when the insurance carrier accepts the financial responsibility of the insured resulting from an accident payment and strives to get repayment from the at-fault individual.

The process is also utilized by health insurance entities. If their policyholder gets injured in a motor vehicle accident and the other party is at fault, the health insurance company pays the bill.

They immediately go after the third party insurance company for reimbursement of the medical costs.

Fortunately for policyholders, the subrogation procedure is very modest for the victim of an accident compared to the fault of a third party. 

The strategy is signified to protect insured individuals; wherein the insurance companies of both parties entangled labor to intercede and fairly come to a decision for payment. 

It benefits the policyholder in that the guilty party has to pay during the subrogation process and that ensures the policyholder’s policy will not escalate. 

In case you have an accident, it is still essential to keep up communication with your insurance company. Ensure that all accidents are documented by the insurer quickly and let the insurer know if you plan to take a settlement or pursue legal action. 

If a settlement happens outside the typical subrogation process among the two parties inside a courtroom, it is most times legally questionable for the insurer to seek subrogation against the guilty party. This is because a waiver of subrogation is usually tied to a settlement.

Subrogation Waivers

A waiver of subrogation is an agreement requirement wherein a policyholder relinquishes the liberty of their insurance company to pursue compensation for losses from a liable third party. Generally, insurers charge an extra payment for this unique policy authorization. A lot of construction agreements and leases encompass a waiver of subrogation paragraph.

Overall, it is important for both the insurer and the policyholder to keep each other abreast of whatever move they intend to take, to ensure there are no surprises.