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The insurance carrier only acquires the subrogation of rights for payments actually made. This is important because the insured retain the rights for payments not made or anything the carrier excludes. The insured could file a lawsuit against the responsible party for those payments.
The lawsuit could include deductible amounts, diminish value, pain and suffering, loss of consortium. If the total loss settlement is low, then the insured could sue for the difference.
Note that an insured could still file a lawsuit for the total amount of damages. The insurance company will put a lien against the settlement amount.
If the insured recovers any money, then the insurance company will get pay first until their balance is paid (when full subrogation of rights occurs). Anything beyond that will be for the insured.
The opposite situation is more common in the insurance world. The insurance company pays for your damages, and then it takes action against the responsible party (seeks subrogation of rights).
They are enforcing the rights they gained through this clause, and they do this by filing or negotiating with the responsible party’s insurance company (if that person was insured properly).
If that party is not insured, then referring the amount owed to a collection company. What is different here is that most insurance companies will also refer the deductible amount paid by the insured (your subrogation of rights).
Most insurance carriers do this, but some will only try to recover what they have paid, not protecting your deductible payments, (they have no actual obligation).
If your insurance carrier takes it upon themselves to recover your deductible, then when and if the insurance company recovers any money; the funds should be distributed between the insured and the insurance company according to the percentages paid by the carrier (the damages) and by the insured (the deductible). Let me explain.
Say you sustain $10,000 worth of damage. Your collision deductible is $500. Insurance pays $9,500 to your body shop. The accident is with an uninsured driver and you do not carry Uninsured Motorist Property Damage.
Say your insurance only recovers $5,000. Since $5,000 is 50% of the total damages ($10,000), then you should receive a check for $250 (50% of your deductible), and your carrier will keep $4,750 (50% of what they paid).
Let us change the hypothetical a little. Let us say they recover $9,000. Since $9,000 is 90% of the damages paid ($10,000), then each party will get 90% of what they paid. You would get a check for $450 (90% of $500) and your insurance will keep the $8,550 (90% of $10,000).
Nevertheless, when your insurance is the only one, then you have to rely in their collection agency. Many times insurance companies recover for damages, they have paid out and never make payment to their insured.
They will tell you that they will inform you about the subrogation of rights status, but many will just forget. You need to continue calling or writing to see if any money is owed to you.
Read Subrogation of Rights Page II
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