Subrogation is a legal procedure that lets an insurance company make a claim against a third party, to recover benefits that the insurer paid to its insured. The purpose of a subrogation claim is to force the person or company that was at fault for an accident to reimburse the insurance companies that paid insurance benefits as a result of that accident.
In a car accident insurance claim, subrogation usually occurs when the insurer has paid uninsured or underinsured benefits to its insured. In this article, we'll take a closer look at how subrogation works in the context of a car accident case.
Uninsured benefits are insurance benefits that you can receive from your own insurance company if you are hit by a driver who has no car insurance. In such a case, you can make a claim against your own insurance company up to the limits of your uninsured motorist coverage.
Underinsurance benefits are insurance benefits that you can receive from your own insurance company if you are hit by a driver whose car insurance policy limits are not enough to cover your damages. If this situation occurs, you can make a claim against your own insurance company up to the limit of your underinsured motorist coverage only if -- and this is very important -- your underinsurance coverage is greater than the policy limits of the driver who hit you.
One important thing to know about uninsured and underinsured benefits is that those benefits cannot exceed the amount of your primary coverage. For example, if you have $100,000 in coverage for your own potential negligence, you can only have up to $100,000 in uninsured or underinsured benefits.
Nothing happens until your insurance company settles your uninsured or underinsured claim against it. Then, the insurance company will try to get some or all of its money back from the driver that was at fault.
If you are the driver that received uninsured or underinsured benefits from your insurer, subrogation does not generally involve you. Subrogation is primarily between the insurance company and the negligent driver. The insurance company might have to file the subrogation lawsuit in your name, depending on your state’s law, but you are not a "real party" to the subrogation litigation. The insurer conducts all of the litigation, and your only involvement, if any, would be to show up at your deposition or at trial if you are summoned.
Subrogation litigation is usually just about getting money from the negligent driver. Liability is not generally an issue. Technically, the other driver can defend him/herself by trying to show that he/she was not at fault, but that is generally not going to be a good defense. Most subrogation litigation is as a result of open and shut car accident cases, like rear end collisions or running a red light.
Although subrogation litigation sounds threatening, especially if you are the person being sued, the majority of people who are sued in subrogation cases simply don’t have much money. The fact is that most people with no or inadequate insurance have little money and few assets. After all, insurance of any type is primarily for the purpose of preserving one’s assets. If someone doesn’t have much money, that person doesn’t need much insurance.
Insurance companies usually outsource their subrogation litigation to law firms that specialize in subrogation and handle hundreds or thousands of subrogation cases at a time. Their goal is to recover some money for the insurer and move on to the next case. They do not want to waste time pursuing someone who has no money.
In subrogation litigation, the first thing that the lawyer handling the case wants to do is figure out whether the defendant has any money. If the lawyer determines that the defendant has absolutely no money, no assets, and little chance of ever getting any money or assets, the lawyer may very well drop the case. The lawyer may decide that continuing with a lawsuit against an indigent person is just a matter of throwing good money after bad.
But most people are not that destitute; they have some money, or some access to money. In most cases, the subrogation lawyer will agree to settle for less than the subrogation claim, but the defendant is going to have to pay the insurer something to settle the case and make it go away. The insurer will not be looking for a lot of money if the defendant truly doesn’t have it. But it will be looking for something. So, in order to get out of the case, the defendant will need to fill out a financial affidavit for the insurer and perhaps even give it copies of his/her tax returns.