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The aftermath of a car accident: What is subrogation?

On Behalf of | Jun 25, 2021 | Motor Vehicle Accidents |

Auto accidents happen. That’s why here in Pennsylvania, drivers must have liability insurance. The Pennsylvania Department of Transportation (PennDOT) calls it “maintaining financial responsibility” for your vehicle.

Modern vehicles are safer than ever, but they are still heavy, fast, and dangerous. Furthermore, new cars are expensive. For instance, the base model Toyota Camry, the most popular new car of 2020, starts at $25,000. With all the best upgrades and bells and whistles, that new Toyota can cost up to $40,000. 

This high cost is a common reason why some drivers panic after a motor vehicle accident. They may flee the scene. More often, an at-fault driver will attempt to pay cash for damage or injuries and ask to leave the insurance company out of it.

This scenario can be a problem for drivers who sustain an injury but aren’t fully aware of its severity or the damage to their vehicle. Thankfully, insurance companies have a subrogation process that can help you collect the funds you deserve after an accident. 

Subrogation explained

Subrogation describes the right and ability of insurance companies to pursue a third party that should be responsible for an insurance loss. For instance, imagine that your new Camry is damaged in a hit-and-run auto accident. The other driver flees the scene, but witnesses get his license plate number.

Your auto insurance will pay for the car repairs if you have full coverage auto insurance or coverage for uninsured or under-insured motorists. Then, they will collect from the other driver’s insurance company. This practice is subrogation.

What if cash payment is accepted after a wreck?

It is possible to get an insurance settlement even if you accepted a cash payment at the time of an accident. If you received a few hundred dollars and then discovered that your vehicle would spend weeks in the shop and cost several thousands of dollars to repair, it is possible to collect for that loss. You would likely need to involve your insurance company for subrogation. Again, your insurer would pay for the repairs and then go after the other driver’s insurance.

One way to avoid this situation is to properly document an accident and trade insurance information with the other driver. The days of accepting a few hundred dollars from another driver after a wreck are gone. Do not accept a quick cash payout. Motor vehicles have more expensive technology and computers in them today. Repair costs can skyrocket quickly.