The simple answer to your question is yes, Allstate may pursue subrogation. You need to understand what is really happening though. You were insured with Allstate and Allstate paid medical bills under your Personal Injury Protection (PIP) coverage. In addition, Allstate paid some bills under your Med-Pay coverage. By law, Allstate has no rights of subrogation for the money paid under your PIP coverage. However, Med-Pay coverage is contractual and not statutory. Therefore, Allstate has a right to subrogate for the payments it made under your Med-Pay policy.
Subrogation means Allstate steps into your shoes to pursue recovery against the party at fault. in your case, the party at fault is also an Allstate insured. If you have released the at fault party in return for a settlement payment, you have infringed upon Allstate's subrogation rights and they may have the ability to pursue collection from your settlement amount. If you have not released the at fault party, Allstate may pursue subrogation. You should speak to an attorney before going any further.