By: Dwight West | Commercial Insurance Advisor
dwest@bankersinsurance.net | (757) 591-3166
WHAT IS SUBROGATION?
Subrogation is more than just a fancy insurance term – it’s a right held by your insurance carrier under your policy that allows them to seek reimbursement from the party found responsible for the accident after they’ve paid a claim for a covered cause of loss. This concept is typically applied in automobile insurance, both personal and business, and is also found in property, general liability, and worker’s compensation insurance. Its primary purpose is to protect you from bearing the financial burden of accidents that were not your fault.
Depending on the success of your insurance carrier’s efforts in the subrogation process, and the resulting reimbursement amount, the insured may be entitled to receive funds held back from their insurance carrier.
WHEN DOES SUBROGATION OCCUR?
Subrogation may apply when you’re involved in an accident, and it’s determined that another party is at least partially responsible. For example, imagine you’re waiting at a stoplight, and your car gets rear-ended. In this scenario, you file a claim using your collision coverage and receive a check from your insurer to cover the repair costs, minus your deductible. After this, your carrier has the right to seek compensation from the insurance carrier of the at-fault party. They aim to recover the total amount they paid for your claim.
Please note that insurance carriers are not obligated to pursue subrogation, however some states require insurers to inform their customers when they decide not to. Customers in those states may then attempt to recover their deductible on their own.
HOW LONG DOES SUBROGATION TAKE?
The duration of the subrogation process can vary significantly depending on the willingness of the other carrier to accept responsibility. It can span from weeks to months, to even years for serious events. The timeline depends on various factors, including the specifics of the incident, the complexity of the claim, and the state where it took place.
WHAT IS A WAIVER OF SUBROGATION?
When a contract mandates a waiver of subrogation, it means that you are relinquishing your insurance carrier’s right to seek compensation from another party, typically the party you are under contract with. Most insurance policy agreements, except for workers’ compensation, allow you to waive your subrogation rights in writing before any loss occurs. Often, an endorsement is added to the policy, explicitly referencing the specific contract to clarify this.
However, there are associated risks to consider:
- In certain jurisdictions, waivers of subrogation may not be permitted. Therefore, it’s essential to learn the state’s laws on this matter. Additionally, you should consult your insurance carrier to understand their stance and agreement regarding waivers of subrogation.
- The requirement for a waiver of subrogation should be incorporated into the contract itself. The contract language should undergo examination to ensure that the waiver of subrogation is appropriately applied to the given situation. For instance, mutual waivers may be advantageous in landlord/tenant contracts, where all parties mutually waive their rights. However, in construction contracts, mutual waivers might not be acceptable or advisable.
It’s best to work with a trusted insurance broker to determine how subrogation applies to your various policies. If you are interested in connecting with one of our brokers to discuss your insurance needs and explore your coverage options, please don’t hesitate to contact us. We’re here to help you find the right coverage and provide the peace of mind you deserve.
I do agree with all the ideas you have introduced on your post. They are very convincing and will definitely work. Still, the posts are very short for newbies. May just you please prolong them a little from subsequent time? Thank you for the post.
Hello, thank you for your feedback and kind words! We will certainly take your suggestion into consideration. Have a great day.