What is Subrogation in Insurance Claims Recoveries?

What is Subrogation in Insurance Claims Recoveries?

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Hi, my name is Adam Stewart, Debt Collection Expert and owner of Debt Recoveries Australia.

Subrogation is the act of one party claiming the legal rights of another that it has reimbursed for losses. In the insurance industry, it’s when the insurer pays one of its insured’s for damages, then makes its own claim against others who may have caused the loss or contributed to it.

For Instance: Suppose you have a car accident and you are not at fault. You have insurance on your car, so you call lodge a claim with your insurer and they pay you for all of your expenses related to the accident. Your insurance company can then seek reimbursement from the at-fault party or their insurer, under their rights of subrogation. Your insurer is subrogated to the rights of your policy and can step in your shoes to recover any amount paid out on your behalf. If you check your insurance policy, most insurers have this clearly marked in your policy.

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    Your insurance company must inform you if they are going to subrogate your claim. If they do, any excess you paid must be part of the amount your insurance company seeks to recover. If your insurance company does not pursue subrogation, you can sue the at-fault party on your own to seek reimbursement for your deductible, however, you may need to apply for a waiver.

    A waiver of subrogation is an agreement that prevents your insurance company from going after the at-fault party for reimbursement. Typically, an at-fault driver will propose a waiver when he or she wants to settle with you directly. You also may need to sign a waiver to get direct payment from another driver’s insurance company.

    Not all car insurance policies will allow you to waive subrogation, and many will require you to notify your insurer before signing any waiver. So make sure you understand the provisions of your own insurance policy before signing anything.

    Typically, your involvement with the subrogation process is minimal and more administrative in nature. Under many insurance contracts, after you file a claim you are not allowed to take any action that would negatively affect your insurance company’s right of recovery of funds, such as signing an agreement with the at-fault driver that releases him or her from liability in exchange for a payment.

    The Benefits of Subrogation

    When your insurance company is confident it will recover some or all of its costs, it is more likely to process your claim quickly and pay all invoices on time. Subrogation also provides a buffer between you and the potential headaches, paperwork, and costs of a lawsuit, mediation, or some other dispute settlement process. Thanks to subrogation, your claim is processed quickly, without having to worry about the recovery process.

    Subrogation allows insurance companies to recover a significant portion of the money they pay out in the event of a claim, especially when they outsource to an insurance recoveries specialist, such as Debt Recoveries Australia. This helps keep your premiums down, since the insurer is keeping its claims costs down.

    Hopefully this has given you some understanding of subrogation and what it may mean to you in the event of a loss.  I would love to hear from you if you have experienced any losses involving subrogation to see how the claims process went for you.


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    Adam Stewart - Debt Collection Expert
    About the Author

    In 2002, Adam Stewart established Debt Recoveries Australia Pty Ltd, a debt collection agency specialising in the insurance claims industry.

    Adam has worked in the fields of motor vehicle insurance and debt recovery for over 12 years, working with some of the largest insurance and debt recovery companies in Australia. Read more

    5 Comments on “What is Subrogation in Insurance Claims Recoveries?

    1. What’s the largest amount recovered from a private individual as a result of a motor vehicle accident?

    2. The largest amount paid out in Victoria Australia, by the TAC was circa Six Million Dollars. The Claimant was an Italian Lawyer injured in an accident whilst a passenger in a Victorian Registered vehicle in Western Australia.

    3. Hi. I wanted to know what happens to the at-fault party if he failed to pay the damage (he didnt have insurance) caused to my car. Would my insurance company file a case or criminal offence against the at-fault party?

      • Hi M. Your insurer would firstly attempt recovery themselves, or perhaps outsource to a debt collection agency or a solicitor. Normally, they would try themselves first. Worst case scenario is legal action, in which case, it’s certainly not a criminal matter. WE would simply issue proceedings through the court for cost of repairs, interest and legal costs. Hope this helps.

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