Subrogation Process and Your Deductible

Subrogation means a policyholder's insurance company seeks a claim for reimbursement for any benefits the insurance company pays its policyholder, including the recovery of the deductible, against an at-fault person. There are state regulations on what kinds of claims can involve subrogation, but the most prevalent ones involve vehicle damage, renter's personal contents damage, and building damage. The following discusses these types of subrogation claims.

Vehicle Damage Subrogation

If an auto policyholder is involved in a car accident, the policyholder may elect to recover the cost of the vehicle repairs under the policyholder's personal collision coverage. This coverage is typically an optional coverage. After the policyholder is paid for the repairs to the vehicle, subject to a deductible, the insurance company seeks subrogation or reimbursement for the full amount of the repairs plus the deductible through the at-fault driver's insurance company. If the at-fault driver's insurance company accepts 100% liability on behalf of the at-fault driver and there is a sufficient amount of property damage liability coverage, the insurance company and the policyholder are fully reimbursed. Depending on how the accident occurred, the at-fault driver's insurance company may conclude the claiming policyholder has some comparative negligence. The allocated percentage of fault will correspondingly decrease the amount of the subrogation claim and deductible.

Renter's Personal Contents Subrogation

If a policyholder under a renter's insurance policy incurs damage through a loss caused by one of the neighboring apartments, there may be subrogation by the renter's insurance company against the at-fault renter. After the renter's insurance company completes its investigation and pays the policyholder for the damaged personal contents, subject to a deductible, the insurance company subrogates or seeks reimbursement against the at-fault renter's insurance company. If there is a sufficient amount of liability coverage to reimburse the policyholder taking into account other filed claims, if any, the insurance company and policyholder should be fully reimbursed. If there are several claims and a limited amount of liability coverage, generally, all the claim settlements could be pro-rated up to the at-fault person's liability coverage. This potentially means only a portion of the subrogation claim, including the deductible, is reimbursed.

Building Owner's Subrogation

Similarly, if a policyholder under a building owner's insurance policy incurs damage to the structure through a loss caused by a neighboring building owner or maybe through a contractor's faulty workmanship, there may be subrogation by the building owner's insurance company against the at-fault party. After the building owner's insurance company completes its investigation and pays the policyholder to fix the building, subrogation or reimbursement is sought against the at-fault party's insurance company for the amount of coverage paid to the policyholder plus any deductible.