What Does It Mean to Subrogate a Claim?

Have you ever wondered how insurance companies are able to sue drunk drivers when they weren’t involved in the car accident? What about when an individual takes a loan from their brother or sister-in-law but fails to make good with their payments? Both of these questions have the same answer: subrogation.

If you’ve had the misfortune of being in a car accident in Houston, you will likely need to make an insurance claim, and you may need legal help to make a case. The Texas car accident lawyers of Lapeze & Johns can help you negotiate with your insurance company and can take your case to court if need be.

Subrogation is a powerful legal tool that allows a third party–be it a second creditor or an insurance company–to seek compensation from other parties that owe debts or damages. As such, subrogation is an important part of the process for those who’ve been involved in car accidents.

Because subrogation means when one party stands in place of another in a legal proceeding, in the case of insurance, the insurance company stands in place of the policyholder.

While this may sound a bit complex, one familiar example of subrogation involves insurance companies suing an at-fault party for damages done to an individual covered by that insurance carrier.

Due to the nature of its definition, subrogation is actually a pretty broad term. It is generally used in four different types of situations: situations involving insurance, guarantees of another person’s loan, tax fee reimbursement for easement or leasehold estate owners, and liability of original homeowners who pass on an existing note. Each of these situations is different, but each involves seeking compensation from one party after paying off a different party.

The insurance carrier makes a subrogation claim against an at-fault party in order to seek compensation for the expenses they covered for an insured individual. When an insurance company takes civil action against a party on behalf of a policyholder, they assume the same legal standing as that policyholder. This means they have as much right to take such an action as the policyholder themselves. This also means that they will be, perhaps indirectly, seeking compensation for the damages caused to the policyholder because they already paid for those damages.

When you guarantee a loan for a friend or family member, you assume certain responsibilities. For instance, you may be forced to pay off the loan. In this case, you can seek compensation from the debtor in the same way the lender could. You are subrogated to the lender’s claim against the borrower, essentially putting you in the same position as someone who purchased the lender’s note.

If you hold an interest in someone else’s real property, you may suffer negative consequences if the property holder goes into foreclosure. To avoid this, you may choose to pay the taxes on the property. However, by making this payment, you’re also protecting the fee owner by paying an obligation that is their responsibility. As such, you may be able to seek compensation from the owner, a subrogation of the rights of the taxing authority.

Often when a home is sold, the new buyer assumes the existing note and mortgage. However, the original buyer–the original signatory to the mortgage–may still be liable to the mortgage lender. You may choose to pay off the mortgage if the new buyer fails to do so. In this case, you subrogate the rights of the lender and can seek compensation from the new mortgage holder for the amount you paid on their behalf.

Unfortunately, the processes of making an insurance claim and taking civil action are quite complex and confusing. Thankfully, you don’t have to do either of these things alone. If you’ve been in a car accident in Houston, Lapeze & Johns can help you recover.

What Does It Mean to Subrogate a Claim?

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