When an automobile insurance company pays its customers for property damage or no-fault medical claims caused by third parties, the insurer uses the subrogation process to seek reimbursement for these payments. Subrogation, put simply, is the right your insurance company has to go after an uninsured person who caused damage to you or your property.
Insurers pursue these payments against uninsured drivers and other insurance companies to limit losses on claims. The time required to resolve subrogation claims varies greatly, depending on the complexity of the claims.
TL;DR (Too Long; Didn't Read)
The subrogation process can take anywhere from 30 days to several years.
Basic Subrogation Process
When an insured driver is involved in an accident, his insurer will typically investigate the accident to determine who is at fault. If the other driver caused the accident, the insurance company will ask the other driver's insurer to pay for any vehicle repairs, property damage and medical treatment.
If the two insurers cannot agree on fault, they generally pay their own insureds' claims and then either sue the other driver's insurer for reimbursement or ask a mediator or arbitrator to settle the dispute.
Simple claims can be resolved quickly with minimal expense and frustration for all involved. Straightforward claims like rear-end accidents can sometimes be settled in just 30 days. In those situations, the at-fault party's insurance carrier will either just pay for the innocent driver's damages directly or reimburse the innocent driver's insurer for a paid claim. These claims can be settled quickly because everyone agrees on the facts and the damages sustained.
More complicated claims can take a year or longer. Claims involving multiple parties can be difficult to resolve because all the drivers and witnesses may give different accounts of what happened. Claims involving disputed traffic lights or speeds can be very difficult to settle because insurers typically believe their own insured without direct evidence to the contrary. If the insurers cannot settle, litigation may be necessary.
How Subrogation Helps Policyholders
Subrogation helps keep premiums lower. Without subrogation, insurers would not have a way to recover losses caused by third parties. In turn, they would likely raise premiums to compensate for the losses.
Subrogation can help policyholders more directly. When a claim involves disputed liability, the policyholder may be forced to submit her claim to her own carrier under her collision coverage. This usually involves paying a deductible. When her insurer later pursues subrogation against the other driver, the insurer will also seek reimbursement for the customer's deductible.
E.S. Martin is an attorney who has worked in civil litigation for more than eight years. He focuses his work in insurance, personal injury, subrogation and risk management.