Subrogation

Subrogation is the substitution of one person or group for another in a legal setting. In the field of insurance, subrogation is when your insurance company stands in for you and assumes your legal right to pursue an individual or organization for an insurance claim.

Subrogation begins with the insurer paying for losses associated with an insurance claim. You’ve filed an insurance claim with your carrier and received the payment. Now, the insurer decides to pursue the party that caused the damages. In an effort to recover the money that it paid you, it sues that third party – effectively representing your interests in a court.

Basically, subrogation is a technique used by insurance companies to reclaim the money paid out for insurance claims. Three parties are involved: the insured (the policyholder), the insurer (the insurance company), and the party responsible for the damages. Your insurance policy will include a section on subrogation that explains your insurance provider’s legal right to use this technique in certain scenarios.

Following a traffic accident, an insurance provider can use subrogation to pursue the driver of the vehicle that is ruled at fault to recoup losses. For example, if a SUV runs a red light and hits a landscaper’s company-owned truck, the landscaper files a claim on his commercial auto insurance, and his insurance provider sends him a check to cover the damages. After the claim is settled, the landscaper’s insurance provider uses subrogation to seek reimbursement from the SUV owner by going to court on behalf of the landscaper.

Workers’ compensation insurance is another area where an insurance company could use subrogation to recoup money paid on an insurance claim. If a third party’s negligence causes injury to a worker, the injured worker has a right to sue for damages. As with the above example, the insurance company could represent the injured worker in court to recoup money that it paid on a workers’ comp claim.

It sounds complicated, but there’s a simple reason that insurance providers engage in subrogation: it gives them a better chance at getting their money back. Because they’re more likely to recoup the cost of a claim, insurance companies that use this technique can often lower their insurance premiums. That means subrogation can end up benefiting both the insurance provider, who gets back the money from the claim, and the policyholder, who may pay a lower premium as a result.

However, it’s not always beneficial for the policyholder. If your insurance company has paid your claim, and then you receive money from the party that caused the damages, you may have to reimburse your insurance company up to the amount that it paid you.

Subrogation policies vary depending on the policy and the insurance provided. Compare multiple policies with one application online with Insureon, and consult with one of our licensed agents for more information.

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