If you’ve read your insurance policy, or worse, found yourself in an accident that wasn’t your fault, you may have heard of subrogation. But what does it mean? Legally speaking, subrogation is when one party is allowed to take on the rights of another party. When it comes to car insurance, subrogation is when your insurance company pays for your damages or bills after an accident, then attempts to get reimbursed by the other driver’s insurance. This is convenient for you because you don’t have to wait to pay your bills, and you do not have the hassle of trying to recover those expenses from the other driver. Instead, the insurance company will do it for you. But if you file a personal injury lawsuit, you should understand how subrogation will impact your settlement.

How Does Subrogation Work?

As explained above, subrogation allows your insurance company to recoup expenses they have paid to you for an accident that wasn’t your fault. They will pursue these expenses from the at-fault party. You may even receive your deductible back if your insurance company is able to collect the full amount. Although your insurance will inform you that they are seeking subrogation, there isn’t much required of you because this process usually occurs behind the scenes. Not every accident will be eligible for subrogation, even if the other driver was at fault. It depends on the details of your accident and the local laws.

What is a Waiver of Subrogation?

Sometimes an at-fault driver wishes to settle a case directly with you without involving your insurance company. In these cases, they may ask you to sign a waiver of subrogation. A waiver of subrogation essentially removes the rights of your insurance company to seek compensation on your behalf. This is generally not recommended without discussing it with your insurance company first because it prevents them from helping you if something goes wrong with your settlement. Some policies actually have clauses specifically disallowing you from signing a waiver of subrogation. If you do so, it is a breach of contract, and you can lose your coverage.

Can Subrogation Impact My Settlement Amount if I File a Personal Injury Claim?

Subrogation can potentially decrease the amount of your personal injury settlement because you will likely have to reimburse your insurance for the money they paid for repairs and medical bills while you were waiting for your case to be completed. For example, say you were involved in a car accident where another driver was at fault, and your car sustained $5000 worth of damages, and you had a $10,000 medical bill. Under subrogation, your insurance would pay $15,000 to settle those expenses, intending to recover that amount from the at-fault driver’s insurance. If you then successfully sued that driver for damages and were awarded $25,000, you would have to pay your insurance $15,000 of that to cover the amount they had already paid. This significantly shrinks the total amount you will receive from the settlement. However, in some places, there are caps on how much of your damages your insurance can collect. Because subrogation can complicate a personal injury claim, it is key to work with a lawyer who has experience with car accident litigation. They can explain how subrogation impacts you and work with both insurances to achieve a satisfactory outcome.