Imagine that you are in a car accident. As accidents go, this one is not particularly serious. You suffer no injuries and fault for the accident seems entirely attributable to the other driver. Your car is totalled in the accident, but you are not worried: you have a Standard Automobile Policy of insurance (see p. 14) on the vehicle and that includes collision coverage. At most, you will have to pay a $200 deductible. You report the loss to your insurance company and receive a cheque a few weeks later for the cost of the car. You are ready to put the accident behind you. Then your insurance company calls to inform you that they are suing the driver of the other vehicle to recover the money that the insurance company paid you. The company informs you that you are obligated to act as a witness in the trial and to assist the company fully in this lawsuit. Obviously, you cannot put the accident behind you until the lawsuit is resolved. You have encountered the insurance principle of subrogation.
What is Subrogation?
In general terms, subrogation refers to the legal right of an insurance company, once it has paid its insured for a given loss, to "step into the shoes of the insured" and t6 sue any party responsible for causing the lost. In the context of automobile insurance in Alberta, the right of subrogation arises as follows:
In the absence of insurance coverage, a person who suffers loss or damage to his or her motor vehicle as a result of an accident has no way of recovering compensation for the loss other than by suing the person who caused the damage (the wrongdoer). Proceeding with this type of lawsuit can be expensive and time consuming, thus placing a significant burden on a person who, through no fault of his or her own, has suffered loss or damage to his or her vehicle.
Automobile collision insurance relieves a car owner of this burden by obligating the insurance company to pay for loss or damage to the vehicle even when the damage is caused by someone else.
Once the insurance money is paid to the car owner, however, fairness suggests that the insurance company should be allowed to recover this money from the party who caused the damage in the first place. In other words, upon paying the car owner for the loss or damage, the insurance company should be able to take over the car owner's right to sue the wrongdoer. Moreover, the wrongdoer should not be able to avoid liability for the accident just because the person whose …
