After someone is involved in an automobile collision, they often hear the words "subrogation," "subrogated," "subrogate," and even the informal "subro." Click on the title above to read about its meaning.
Subrogation - Definition and Limitations in Automobile Collision Cases
When someone is in a car accident, they learn a great deal about insurance and their rights. They also start hearing new words, including the word "subrogation." This article is intended to provide a basic explanation of the term "subrogation" to people who are new to the concept. "Subrogation" is a legal term for an insurance company's ability to get its money back from another insurance company. In other words, if my insurance company pays for my automobile damage or medical bills, but the collision was someone else's fault, then my insurance company can "subrogate" by directly going after the at-fault person's insurance company for reimbursement for those payments. "Subrogation" is the specific word for when one's insurance policy (a contract) gives one's insurer the contractual right to seek reimbursement directly from the at-fault insurance. In some states, the Courts have decided that if an accident victim gets an attorney, their insurance company no longer has the right to "subrogate" directly against the at-fault insurance. Instead the accident victim's attorney seeks reimbursement from the at-fault insurance, and then must take care of reimbursing the victim's insurance company (sometimes in a reduced amount). In this case, the victim's insurance company does not have a "subrogation" right (seeking reimbursement themselves), but still has a right to be reimbursed, even if it is a limited right.
Subrogation - The Process
Once an insurance company has made all of its payments for a specific kind of coverage (such as collision coverage, or personal injury protection coverage), it sends documentation of their payments directly to the at-fault insurance. The at-fault insurance company then reviews the documentation, and either pays the amount in full, or disputes all or part of the amount. An example of why an at-fault insurance company may dispute the amount is that the victim was in a rental car an extraordinarily long time because their insurance company was too slow to write a repair estimate or issue payment. The victim's insurance company can agree to a reduced amount or decide that it is willing to fight, or "arbitrate," for full reimbursement (see "arbitration" below). If arbitration is not an option, then it can also sue the at-fault insurance company.
Subrogation - Using Arbitration to Recover Payments
When one's insurance company decides it wants to "arbitrate" its subrogation claim, it means that the insurer will submit all of its documentation to a third-party arbitration association, as well as make arguments about why it paid the amount it paid. Arbitration Associations are independent associations to which insurance companies (and other types of companies too) belong. Not all insurance companies belong to arbitration associations, but many do. The at-fault insurance company can then respond to the arbitration association by providing its own documentation (if it has any) and arguments about why it is disputing the paid amounts. With information from both insurance companies, the arbitration association then reviews all of the information, and makes a decision which is binding on both insurance companies. Keep in mind that an arbitration decision is NOT binding on any of the people involved in the collision, only on the insurance companies.
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