Dealing with a Subrogation Claims Against You

If an insurance company has brought a subrogation claim against you, the first question you might have is what is a subrogation claim? We answer this question for you and explain what it means to you if a claim is being brought against you.

Subrogation is the act of stepping into the legal shoes of another in order to assert claims against a third party. In the specific context of insurance subrogation is processed used by insurance companies (e.g., State Farm or GEICO) to go after someone who was at fault in an car accident to recover expenses that the insurance company incurred as a result of that accident. It is known as subrogation because the insurance company subrogates or "steps into the shoes" of its covered insured to brings claims against the third party. Below is an example of how subrogation works:

EXAMPLE: John has car insurance with State Farm. Bob rear ends John on the road causing damage to John's car. John's insurance company, State Farm, ends up paying for the repairs on John's car. State Farm then brings a subrogation claim on behalf of John and goes after Bob (and his insurer) to recover their loss from the crash.

Subrogation is pursued as a claim in the name of the insured against the third party or their insurance company.

When the At-Fault Driver has Insurance

When the third party has insurance subrogation claims are often handled in house between the 2 insurance companies. Continuing with the example above let's say our bad driver (Bob) had car insurance with GEICO. After the accident John's repairs are covered by his own insurance with State Farm. State Farm can then step into John's shoes and submit a claim to GEICO for damages caused by its insured driver Bob. This type of subrogation claim can then be resolved between State Farm and GEICO and John and Bob will just get written notice.

This type of in-house subrogation frequently occurs when fault for an accident is not determined until after an investigation. In our example above where Bob rear ends John it is very obvious that Bob is at fault so Bob's insurance company would probably just agree to pay for John's damages. There would not be any subrogation. However, if Bob and John get in a more complicated accident a determination of who was fault won't be made until after an investigation is completed. But John doesn't have to just wait around with no car while the insurance companies investigation who was at fault. So John's insurance company (State Farm) covers his damages up front. If the investigation concludes that Bob was at fault for the accident then State Farm can recover those damages from Bob's insurance carrier (GEICO).

The example we are using relates to property damage. But the same logical and rationale applies to injury claims. What happens is that the victim's own insurance will pay when your insurance company did not pay enough because your policy limits were not large enough. But that insurance company will want to come back and bring a claim against the person deemed to be at-fault for the crash in the first place for any money they pay out.

When the At-Fault Driver Does not Have Insurance

on-the-job auto accident When the driver who was at-fault in the accident does not have insurance subrogation claims are processed somewhat differently. The insurance company for the good driver would have to bring any subrogation claims directly against the bad driver.

Let's go back to our John & Bob example. Bob rear ends John but it turns out that Bob does not have car insurance. John's insurance company (State Farm) ends up covering John's damages. State Farm can then step into John's shoes and bring a claim directly against Bob.

First State Farm's in-house legal department might send Bob a letter demanding reimbursement for John's damages. Then State Farm could file a lawsuit against Bob with John as the named plaintiff. Bob rear ended John so he was clearly responsible for the accident and will have no defense to the subrogation lawsuit. So State Farm would eventually be entitled to a monetary judgment against Bob for the amount it had to pay out to John.

How to Respond if a Subrogation Claim is Brought Against You

Many people are caught off guard when they first get notice that a subrogation claim is being brought against them. The correct way to respond to a subrogation claim will vary depending on whether or not you have insurance.

When you have insurance:

If you are insured then your insurance company will be responsible for any subrogation claims brought against you. The most important thing to do in this situation is to make sure your insurance company is properly notified of both the accident and any subrogation claims resulting from the accident. Anytime you are involved in an auto-accident you have an obligation to promptly notify your insurance company regardless of if you are at fault or not. So if you get notified of a subrogation claim your insurance company should already be know about the accident. If not you will need to tell them about the accident and the subrogation claim as soon as possible.

Assuming your insurance carrier is properly notified of the accident then any subrogation claims against you should be fully covered by your insurance. Your insurance company will then step in and handle the subrogation claim on your behalf. If the subrogation claim is resolved in house between the insurance companies your involvement may be fairly limited. Your insurance company may ask you for additional information about the accident to evaluate whether or not you were at fault. Otherwise the claim might simply be paid by your insurer and you will just get written notice.

When you do not have insurance:

If you do not have insurance for the accident you will have to defend the subrogation claim yourself (or hire your own attorney). Many insurance companies will come after you even if you do not have insurance. There is a billion dollar cottage industry. State Farm, for example, sends out there subrogation work to a collections firm. The good news the collection firm will usually take less than the full amount to settle the claim. Why? Even if the other insurance company sues you and gets a judgment entered against you they still might not have any way to enforce that judgment. If the insurance company does get a judgment against you they would have the same collection options as any other judgment creditor. They could attach the judgment as a lien on any real property you own. They could also attempt to garnish your wages or bank accounts.

What to know if your insurance company pursues a subrogation claim against someone else

If your insurance company covers your loss and then pursues a subrogation claim against the other driver (or their insurance company) they are required to notify you. You will most likely get a notice letter. In the event that your insurance company recovers money on the subrogation claim they would be required to give you a refund for any deductible you had to pay on your claim. There will be some difference from state-to-state but the laws is largely similar in most states.

Getting a Lawyer to Help You

Our law firm represents only personal injury victims. We do not represent people who are subject to a subrogation claim. We have posted this information because there is so much confusion out there as to what your personal exposure may be if a case resolves by settlement or trial for more money than you or your insurance company have paid.

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