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“No-Fault” State Provisions and the Impact on Insurance Subrogation

Commercial Insurance, No Fault Insurance

Subrogation recovery of insurance payments is common among insurance companies. When you are involved in an accident for which another party may be at-fault, both your health insurance company and your auto insurance company may seek reimbursement of expenses paid on your behalf – a process known as subrogation. In states where “no-fault” provisions apply, the capacity of an insurance company to pursue subrogation may be limited.

Like the provisions for “no-fault” insurance protection, the ability of an insurance company to pursue subrogation, under a “no-fault” clause, also varies from one state to the next. It is important, therefore, that you become familiar with the provisions for subrogation if you reside in “no-fault” state. If your state allows for subrogation, and your insurance company can pursue reimbursement, this may be in your best interest as it will alleviate the financial claim from your record. By transferring that liability and payment to the at-fault party, future insurance carriers will take this into consideration and may, possibly, not rate you as a high risk driver.

Unfortunately, in most “no-fault” auto insurance states, the provisions for subrogation from a responsible third party are limited. As a general rule, the limitations only allow for third party subrogation in the event the at-fault driver failed to carry auto insurance coverage at all or, in the case of commercial insurance coverage, the commercial driver is not required to carry “no-fault” protection. In these two scenarios, “no-fault” insurance states will permit subrogation recovery without question.

In many “no-fault” states, you will find that your insurance company will simply not pursue subrogation. While it may be in your best interest, in terms of long-term financial risk, they simply do not engage in subrogation activity. The reason for this lack of interest lies in the relatively low risk for collecting any recovery. Because many no-fault states, permitting subrogation, require that you, as the driver, be made whole by the at-fault party first, the insurance company is often the last to be paid and, in many cases, never received any reimbursement payment. So, rather than expend the cost of legal fees associated with pursuing subrogation, they simply move on to the next case.

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Subrogation in a “no-fault” state can be a challenging legal process. If you are involved in a motor vehicle accident, and you are not at-fault, you will want to speak with an attorney regarding the issues of recovery and payment from both your insurance company as well as the insurance company of the at-fault driver. In no-fault states, these processes can be time consuming and result in a variety of outcomes.