What Is a Subrogation Letter After a Car Accident, and What Should You Do?
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This page was written and reviewed by Michael J. Cefali, Esq. Attorney Cefali is a founding partner of Cefali & Cefali, APC, based in San Juan Capistrano, CA. He holds a Juris Doctor from Chapman University Fowler School of Law and a B.A. in Global Studies & Maritime Affairs from the California Maritime Academy. Widely recognized for his advocacy in personal injury law, he has secured multi-hundred-thousand-dollar settlements in motorcycle accidents, hit-and-runs, and red-light collision cases. He maintains a perfect 10.0 “Superb” rating on Avvo.
Beyond his legal practice, Mr. Cefali actively supports his community through the Rotary Club of San Juan Capistrano, contributes to housing and meal programs for those in need, and enjoys fishing and spending time with his rescue dogs.
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What Is a Subrogation Letter After a Car Accident, and What Should You Do?
A subrogation letter is a written demand from an insurance company that paid for a crash and now wants that money back from the person it believes caused it. If you get one, do not ignore it: confirm it is real, send it to your own insurer if you had coverage on the day of the crash, and ask for proof of the amount before paying anything.
The same word also shows up after you are the injured person, when your health plan or auto insurer asks to be repaid out of your settlement. This guide covers both situations, explains when you actually owe the money under California law, and walks through the made-whole rule that can limit what an insurer collects from you. Treat it as general information; your own policy and the facts of your crash control the final answer.
What is a subrogation letter?
A subrogation letter, sometimes called a subrogation demand letter or letter of subrogation, tells you that an insurer has paid its own customer for a loss and is stepping into that customer's shoes to recover the money from whoever was responsible. "Subrogation" simply means substitution: the insurer takes over its policyholder's right to sue the at-fault party, up to the amount it paid.
After a car accident, these letters usually arrive in one of three situations:
The other driver's insurer says you caused the crash. It paid to fix its customer's car, cover a rental, or treat injuries, and it wants you (or your insurer) to reimburse it.
Your own insurer is pursuing the other driver. It paid your collision claim and is letting you know it will try to recover from the at-fault driver, which can also get your deductible back.
Your health plan or another payer wants to be repaid from your injury settlement. Health insurers, Medi-Cal, Medicare and hospitals can all assert repayment rights when a third party pays for your injuries.
The letter should name the insurer, its policyholder, where and when the crash happened, a claim number and the amount demanded. Many insurers hand these files to outside recovery companies. Thomas George Associates, for example, is a New York based company that handles subrogation recovery for insurance carriers, so a letter from a firm like that usually means an insurer has assigned it an accident claim to collect.
Do I have to pay a subrogation letter?
You only owe the money if you were legally responsible for the crash and the amount is supported by real costs. Even then, if you had auto insurance on the day of the accident, your liability coverage should handle the demand, so the first step is to forward the letter to your insurer rather than pay it yourself.
How to respond depends on your situation:
Your situation
What usually happens next
You were insured and may be at fault
Send the letter to your insurer with your claim number. Your third-party liability insurance is meant to pay the other side's losses, up to your policy limits.
You believe you were not at fault
Reply in writing that you dispute liability and ask for the evidence, such as the police report, photos and witness statements. Notify your insurer too.
Fault was shared
California follows pure comparative fault, so you are generally responsible only for your percentage of the blame (Li v. Yellow Cab Co., 1975).
You had no insurance
You may be personally responsible. Ask for documentation, check the amount, and consider negotiating a lower figure or a payment plan in writing.
The demand exceeds your policy limits
Your insurer pays up to the limit; the rest can be pursued against you. Talk with a lawyer before agreeing to anything.
Ignoring the letter rarely makes it go away. If the insurer sues and wins, it can enforce the judgment like any other creditor, and the DMV must suspend the driving privilege of a person who leaves a judgment for damages unpaid for 30 days (Vehicle Code section 16370). Courts can allow installment payments, but a missed installment can trigger suspension again (Vehicle Code section 16381). Our guide to being at fault for a car accident covers the wider consequences, and our article on how much insurance rates go up after an accident explains the premium side.
How to check whether a subrogation demand letter is legitimate
Look up the insurer named in the letter on your own, and call it using the number on its official website to confirm the claim number and the company handling it.
Ask in writing for an itemized statement: repair estimates or invoices, rental and medical bills, photos of the damage, and proof the insurer actually paid them.
Compare the demand with what happened. Watch for damage that does not match the crash, a total that includes the policyholder's own deductible twice, or charges that seem high for the repair.
Never pay by gift card, wire transfer to an individual, or cryptocurrency. Real insurers and recovery companies accept checks and standard payment methods and give you a written receipt.
If you agree to pay or settle, get the final amount and a written release in hand before you send money.
Whether federal debt collection rules apply to these letters is not settled. Some federal courts, including the Eleventh Circuit in Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367 (1998), have held that a claim arising from an accident rather than a consumer purchase is not a "debt" under the Fair Debt Collection Practices Act. Either way, you are entitled to ask for documentation before you pay.
How long does an insurer have to pursue subrogation?
An insurer that steps into its customer's shoes generally gets the same deadline that customer would have had. In California, that is usually three years for vehicle and other property damage (Code of Civil Procedure section 338, subdivision (c)) and two years for bodily injury (Code of Civil Procedure section 335.1), counted from the date of the crash. A letter about an accident that happened longer ago than that may be past the deadline, though a lawyer should confirm the dates, because a lawsuit already on file changes the picture. Every other filing deadline appears in our California personal injury statute of limitations guide.
What if my health insurer wants to be repaid from my settlement?
When another driver injures you, your health plan may be entitled to be repaid from your settlement for the treatment it covered, but California law and the plan's own terms often reduce what you owe. The rules depend on who paid the bills.
HMOs and health insurance policies regulated in California. Under Civil Code section 3040, the repayment claim cannot exceed what the plan actually paid, is reduced in proportion to your attorney's fees and costs, and is capped at one-third of your recovery if you have a lawyer (one-half if you do not). If you were partly at fault, it is reduced by the same percentage.
Medi-Cal. The state has its own repayment rights under the Welfare and Institutions Code (section 14124.70 and following), and the U.S. Supreme Court limited Medicaid recovery to the medical expense portion of a settlement in Arkansas Department of Health and Human Services v. Ahlborn (2006).
Medicare. Under the Medicare Secondary Payer Act (42 U.S.C. section 1395y(b)(2)), Medicare must be repaid for conditional payments it made for crash-related care, and its claim must be resolved before or as part of the settlement.
Employer plans governed by ERISA. Self-funded employer plans are controlled by federal law, and the U.S. Supreme Court held in US Airways v. McCutchen (2013) that clear plan terms decide how much they can recover. Ask for the plan document before agreeing to a number.
Hospitals. A hospital that treated you can assert a lien under California's Hospital Lien Act, starting at Civil Code section 3045.1, and the law limits all such liens together to a share of what you recover (Civil Code section 3045.4).
These claims are often negotiable. Plans and payers regularly accept less, especially when the settlement is small compared with the injuries, so do not pay the first figure on a lien notice without checking how it was calculated.
What is the made-whole rule?
The made-whole rule says an insurer cannot take back money through subrogation until its own policyholder has been fully compensated for the loss. In California, the leading case is Sapiano v. Williamsburg National Insurance Co. (1994) 28 Cal.App.4th 533, which held that an insurer seeking to get around the rule must do more than rely on policy language and cannot simply sit back while its insured does the work of recovering.
Later cases filled in the details. In Plut v. Fireman's Fund Insurance Co. (2000) 85 Cal.App.4th 98, the court held that an insurer that knew about its insured's lawsuit and chose not to take part could not share in the recovery unless the recovery exceeded the insured's actual loss. The California Supreme Court added in 21st Century Insurance Co. v. Superior Court (2009) 47 Cal.4th 511 that the attorney's fees an insured pays to recover from the other driver are not counted when deciding whether the insured was made whole.
In practice, the rule matters most when the responsible driver carried too little insurance to pay for everything. If your losses were $90,000 and the other driver had a $30,000 policy, your own insurer's claim for what it paid may have to wait until you are compensated. The rule can be changed by clear contract language in some policies, and federal law controls many employer health plans, so the exact answer depends on your policy. When the other driver had little or no coverage, our guides on what happens when the at-fault driver has no insurance and stacking uninsured motorist coverage explain other places to look for money.
What to do after you receive a subrogation letter
Read the whole letter and note the insurer, claim number, accident date and amount.
Confirm the sender by calling the insurer at a number you find yourself.
If you had insurance, forward the letter to your insurer the same week and keep a copy.
If you dispute fault or the amount, reply in writing and ask for the supporting documents.
Check the dates against the three-year and two-year deadlines above.
Do not sign a payment agreement, admit fault, or send money until you understand what you are agreeing to.
If you were injured, or the demand is large, talk with a car accident lawyer before you respond.
Get help with a subrogation demand or lien
Subrogation claims and medical liens are where small details change real dollars: who was at fault, which policy applies, and whether a plan's repayment claim can be cut. Michael J. Cefali and Courtney L.C. Cefali help injured Orange County drivers sort out subrogation demands and medical liens, and Michael's career recoveries for clients exceed $60 million. Reach us at (949) 325-7790 for a no-cost review, or learn more on our Orange County car accident lawyer page. You pay nothing unless we recover money.
Subrogation letter FAQs
What is a subrogation letter?
It is a written demand from an insurer that paid a claim and wants to recover that money from the person or company it believes caused the loss. After a car accident, it usually comes from the other driver's insurer or a recovery company working for it.
Do I have to pay a subrogation letter?
Only if you were legally at fault and the amount is supported. If you were insured when the crash happened, forward the letter to your insurer, because your liability coverage should respond. If you dispute fault or the amount, say so in writing and ask for proof.
What if my health insurer wants to be repaid from my settlement?
It may be entitled to some repayment, but California Civil Code section 3040 limits most health plan claims to what was actually paid, reduces them for your attorney's fees, and caps them at one-third of your recovery when you have a lawyer. Medi-Cal, Medicare and ERISA plans follow separate rules.
What is the made-whole rule?
It is the rule that an insurer cannot recover through subrogation until its policyholder has been fully compensated. California applies it under Sapiano v. Williamsburg National Insurance Co. (1994), although clear policy language and federal law can change the result for some policies.
Is a letter from a subrogation recovery company a scam?
Usually not. Many insurers hire outside companies to recover accident payments. Confirm the claim by calling the insurer at a number you find yourself, ask for documentation, and never pay by gift card or wire to an individual.
How long can an insurer wait to send a subrogation demand?
It generally has the same deadline its policyholder would have had: three years for property damage under Code of Civil Procedure section 338 and two years for injuries under section 335.1, measured from the crash.
Michael Cefali is a dedicated accident attorney based in San Juan Capistrano, California, committed to securing justice and fair compensation for accident victims.
A graduate of Newport Harbor High School, he went on to earn his Bachelor’s degree in Global Studies and Maritime Affairs from the California Maritime Academy, followed by his Juris Doctor from Chapman University School of Law.
Deeply invested in his community, Michael is an active member of the Rotary Club of San Juan Capistrano, contributing to efforts that provide meals, housing, and support to those in need. Outside of his legal work and volunteer service, he enjoys fishing in Dana Point and spending time with his three rescue dogs—a Chihuahua, a Spaniel mix, and a Shepherd mix.
Driven by his strong belief in justice and fairness, Michael remains steadfast in advocating for individuals harmed by the negligence or inaction of others.
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