What Is Insurance Subrogation?

FAQs About Subrogation in Insurance

• What is subrogation in insurance?
• What is a waiver of subrogation?
• How long does a subrogation take?
• How do you deal with insurance subrogation?
• Expert(s) who answered

What Is Subrogation in Insurance?

Subrogation in insurance refers to the insurance company recouping losses from the at-fault party after you file a claim and receive your payout. The insurance company essentially steps in for you in a legal battle against the at-fault party. Your carrier has paid you what you're owed from the claim, as dictated by the coverage in your policy, and now they will recover their financial loss from the responsible party.

Subrogation is beneficial to insurance companies because it allows them to collect losses from a negligent third party. You have insurance to protect you, but if someone else is responsible for your injuries or damage to your property, a subrogation makes it so that they pay the insurance company back for what they're at fault for. Here's a further breakdown of the subrogation meaning in insurance with examples.

Subrogation Car Insurance

Here's an example of insurance company subrogation when it comes to car insurance. Say you're a taxi driver, and you're going about your business on the job one day when someone in a Mustang runs a red light and crashes into you. First, you'd file a claim through your commercial auto insurance, then your insurance company would investigate the claim, determine you weren't at fault, and pay out the amount they owe you based on your coverage limits and terms in your policy. 

But now the insurance company needs to recoup its financial losses after having paid out your claim. To do this, the insurance company may go to court on your behalf to get reimbursement from the driver of the Mustang. The insurance subrogation claim would be settled via the legal battle between the Mustang driver and your insurance company.

What is subrogation in health insurance?

Subrogation in health insurance refers to the same process as described above, only through a health insurance policy, if the cause of the illness, disease, etc., wasn't the insured's fault. If a policyholder was injured by a third party and then had to get a procedure done at the hospital, they'd first go through their own health insurance to get compensated for their treatment. Afterward, their health insurance company would pursue reimbursement from the at-fault party's insurance. 

What Is a Waiver of Subrogation?

A subrogation waiver insurance form states that you will not sue someone if something happens as a result of the work they perform. Some professionals will require customers or clients to sign these before they begin working on your property. This would be a waiver of subrogation property insurance. 

So, if you had an electrician working at your house on the wiring and then an incident occurred that caused damage or a break of an appliance, since you signed the waiver of subrogation, you wouldn't be able to ask the electrician to pay for the damages. If the faulty wiring job led to a fire in your home that caused damage, your insurance company would also be exempt from suing the electrician to cover the damage. In short, waiving the subrogation means you're waiving the right for yourself or your insurance company to ask for their money back from a third party on a claim. 

Waiver of Subrogation in Favor of Additional Insured

An additional insured individual is someone you've added to your insurance policy who will now also benefit from your coverage. In business, a subcontractor may add coverage under their policy for the general contractor. An insurance subrogation waiver would not hold the contractor or subcontractor responsible for damages, even if they were at fault. By expanding the coverage to an additional insured in this situation, both of the insured parties would now be protected by subrogation in the event of a loss they caused, even partially. 

How Long Does a Subrogation Take?

Subrogations take varying amounts of time, but the process commonly goes on for six months or longer. It depends on how much money you or your insurance company is trying to get back, whether they have to sue for the money, and whether the statutes of limitations in your state come into play. 

Sometimes, an insurance company determines that the subrogation process isn't worth the amount to be reimbursed. They might send letters and make a small effort to get the reimbursement, but ultimately decide it's not worth pursuing. You can't put a time frame on a subrogation, but if the claim is clear, insurance companies will work together, and usually, the subrogation will move in a timely manner. 

How long does an insurance company have to subrogate?

Each state has its own statute of limitations for subrogation, or the length of time during which insurance subrogation is permitted. The longest statute of limitations for subrogation is six years. This limit is allowed in the states of Maine, Minnesota, and North Dakota. All other states have shorter subrogation insurance statutes of limitations.

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How Do You Deal with Insurance Subrogation?

How to deal with insurance subrogation is to let your insurance company handle it, because it's their job, not yours as the insured. Your job as the insured is to file a claim through your insurance policy to get reimbursed for whatever the loss is. 

Next, your insurance company will investigate your claim and send your payout if you're entitled to it based on your coverage limits, etc. From there, your carrier may use subrogation to recoup its losses by going to court with the responsible third party.

Does subrogation affect insurance rates?

Subrogation can actually help you, the insured, in terms of your coverage rates. Since the subrogation process moves the costs your insurance company has to pay to the at-fault party's responsibility, this allows your policy's rates to remain low. 

So, there's no need to worry about the concept of "an insurance subrogation claim against me," since your insurance company handles the entire process, and it helps keep your rates low at the same time. Overall, subrogation works out in the insured's favor.