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What is Subrogation

I’m David Holub, an attorney focusing on personal injury law in northwest Indiana.

Welcome to Personal Injury Primer, where we break down the law into simple terms, provide legal tips, and discuss personal injury law topics.

Today’s question comes from a caller who had a question about subrogation. The question was prompted by his auto insurance carrier sending him a check for his $1000 deductible months after it paid the claim for the total loss of his car.

Subrogation describes an insurance carrier’s right to pursue a claim against the party that caused an insurance loss to an insured.

In other words, when an insurance carrier pays for harm someone else causes to you, it reserves for itself the right to recover the amount paid against whoever caused you damage.

For example, let’s assume Joe owns a barbershop on the corner of Main and Broadway. Suppose Bob in the building next door negligently starts a fire, and the fire burns down Joe’s barbershop. Joe makes a claim with his fire insurer. The insurer reimburses Joe for his loss of $200,000.00. The insurer, in doing so, acquires the right to go after Bob, and Bob’s insurance carrier, to recoup the money it paid to Joe.

Subrogation literally refers to the act of one person or party standing in the place of another person or party.

When an insurance company pursues a third party for damages, it is said to “step into the shoes of the policyholder.” Doing so will give it the same rights and legal standing as the policyholder.

Most insurance policies contain language granting an insurer, once losses are paid on claims, the right to recover funds from a third party if that third party caused the loss.

Subrogation is standard with auto insurance policies. Especially with property damage claims.

Your insurance may promptly pay for your property damage and then subrogate against the other driver and his insurance carrier.

It may take months or years for the insurance companies to fight it out, though you have quickly been paid and replaced your car.

When an insured driver’s car is totaled through the fault of another driver, the insurance carrier reimburses the covered driver and then pursues legal action against the driver at fault. Suppose the carrier is successful and recovers an amount greater than it paid out (say, an amount that includes the deductible). In that case, it must repay any deductible collected from the insured.

The refund of the deductible is what prompted the caller’s question.

Subrogation also occurs within the health insurance industry.

If a health insurance policyholder is injured in an accident and the insurer pays $50,000 to cover the medical bills, that same health insurance company is allowed to collect $50,000 from the at-fault party to reconcile the payment.

I hope you found this information helpful. If you are a victim of someone’s carelessness, substandard medical care, a product defect, work injury, or another personal injury, please call (219) 736-9700 with your questions. You can also learn more about us by visiting our website at DavidHolubLaw.com – while there, make sure you request a copy of our book “Fighting for Truth.”