What is subgration?

Answer 1

Subrogation is the right of an insurance company to attempt to recover claims paid to their own insured, from negligent 3rd parties.

Let's say that your automobile is insured with Big National Insurance Co (BNIC)., and you are in an accident with two other autos, one insured with Fancy State Insurance Co. (FSIC), and the other auto is uninsured. The first question is that of fault; who caused the accident. Let's assume that it was not you. You may be injured, which might trigger no-fault benefits (varies by state, of course), and your car is damaged and requires repairs totaling $3,000. You submit your claim to BNIC, since they are your insurance company. BNIC then pays your medical benefits and pays to have your car repaired. You are now "made whole" and you get on with your life.

BNIC at this point is "subrogated" for what they paid to you and on your behalf. BNIC now has the right to seek reimbursement from both other drivers. FSIC would step in and protect their insured driver, and while the two insurance companies may not entirely agree on fault, amount, etc., there is usually a mechanism to mediate or arbitrate the dispute. The uninsured driver, however, may be held personally liable. Depending upon whether that driver has sufficient personal assets, BNIC may or may not file suit to collect what they feel they are owed. This is "subrogation". Your insurance company, by paying your claim, now "stands in your shoes" to recover from 3rd parties.