By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.
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What subrogation means
The California Department of Insurance explains it in one line: “When one insurance company tries to get money back from another insurance company, it is called subrogation” (CDI auto insurance guide). The Texas Department of Insurance calls it “the legal right of insurance companies to pursue another person’s insurance company” (TDI glossary).
The letter itself is how that right gets announced. It names the insurer or plan, gives a claim or file number, lists what was paid and asks you to protect its interest. Some letters also ask you to fill out an accident questionnaire or sign a reimbursement agreement.
Who sends them after a crash
- Your auto insurer, after paying to repair your car under collision coverage. TDI says your company “will probably try to collect from the other driver’s company” (TDI auto insurance guide).
- Your MedPay or PIP insurer, after paying medical bills.
- Your health plan, after paying for treatment of crash injuries.
- Medicare, through its recovery contractor. CMS sends a conditional payment letter within 65 days of its rights and responsibilities letter, then a formal demand, and interest runs from the date of that demand (CMS recovery process).
- The other driver’s insurer, if it believes you caused the crash.
If the letter says you caused the crash
Send it to your own auto insurer right away. Your liability coverage is what pays for the other driver’s car and injuries when you are at fault, and TDI warns that if your limits are too low, “you might have to pay the rest out of your own pocket.” Do not call the other insurer to argue or apologize, and do not agree to a payment plan before your insurer and, if needed, a lawyer look at it.
If you think the other driver was partly or fully to blame, say so in writing through your insurer. Shared fault can reduce or end the other side’s claim depending on the state, as our page on comparative fault explains.
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If you were hurt: the made-whole rule and state limits
The made-whole rule protects injured people who recover less than their full losses. It is applied differently in each state, and health plans have their own statutes.
| State | Auto insurer (MedPay or PIP) | Health plans |
|---|---|---|
| California | For auto MedPay, the insurer generally cannot be reimbursed from third-party money until you are made whole for all damages caused by the injury. A policy can override this only with language that clearly says so. Attorney fees are not part of the made-whole test, but the insurer pays its pro rata share of them (21st Century v. Superior Court, 2009). | Civ. Code 3040 caps many plan liens (Civ. Code 3040) |
| Texas | A PIP insurer generally has no subrogation right against the at-fault person unless that person lacked the required insurance (Ins. Code 1952.155). | The made-whole doctrine does not apply to covered plans (140.005(d)), and plans generally cannot recover from your own first-party recovery, with a limited exception when you or your family did not pay the premiums (140.008) (CPRC ch. 140) |
| Washington | A PIP insurer “can recover only the excess” that remains “after the insured is fully compensated for his loss.” In Mahler, the court also held that the insurer’s policy required it to share in the expense of recovering its PIP payments (Mahler v. Szucs, 1998, quoting Thiringer v. American Motors, 1978). | Depends on the plan and the law that governs it |
The dollar caps on health plans and the Medicare reduction formula are worked through with numbers on our $50,000 settlement page. Texas chapter 140 does not cover Medicare, Medicaid or self-funded ERISA plans (CPRC 140.002), so ask for the full plan document before you agree to any amount.
What happens to your deductible
When your own insurer pays for repairs and then pursues the at-fault driver, two states have rules that protect your deductible.
In California, an insurer that makes a subrogation demand must include your deductible in it and must share what it recovers with you on a proportionate basis, unless you already got the whole deductible back. It cannot subtract legal or other expenses from the deductible recovery unless it hired an outside attorney or collection agency, and then only a pro rata share (10 CCR 2695.7(q)).
Washington’s rule is stronger on order of payment. The insurer must include your deductible in its demand, and recoveries go first to your deductible, less your share of fault. It must contact you within 60 days after subrogation starts and at least every 180 days after that until your interest is resolved (WAC 284-30-393).
In Texas, ask your adjuster in writing whether your deductible is part of the demand. Our page on paying your deductible when the crash was not your fault covers the choice between your insurer and the other driver’s.
What to do when a subrogation letter arrives
- Keep the letter and envelope, and write down the claim number and any deadline.
- Ask for an itemized list of what was paid, with dates of service, so you can check that every charge relates to the crash.
- Ask for the policy or plan language that gives the right to be repaid.
- Do not sign a reimbursement agreement or send money before a lawyer reviews it.
- Give a copy to your lawyer, who will need every repayment claim before your case can close.
What this means for your case
Subrogation claims are paid out of the same settlement money as fees, costs and provider bills, so an unreviewed claim shrinks what reaches you. The rules above often cut those claims or delay them until you are fully paid. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. For Texas PIP rules, see is Texas a no-fault state.
Common questions
Do I have to respond to a subrogation letter?
Do not ignore it. Pass it to your lawyer, or to your own insurer if the letter says you caused the crash, and let them answer in writing.
Can my insurer take money from my settlement before I am fully compensated?
In California for auto MedPay and in Washington for PIP, the made-whole rule generally says no. Texas law says the made-whole doctrine does not apply to health plans covered by chapter 140.
Will I get my deductible back?
Often, if the insurer recovers from the at-fault driver. California and Washington rules require insurers to include your deductible in their demands.
Is a subrogation claim the same as a medical lien?
They are related. A lien is usually a provider’s claim to be paid from your settlement, while subrogation is the claim of an insurer or plan that already paid. Read medical liens after a car accident.
Does the insurer share my lawyer's fee?
Often it does. California requires a pro rata share for auto MedPay, in Washington the Mahler court required a PIP insurer to share the expense under its policy, and Texas reduces a health plan’s recovery by fees and procurement costs. Beverly Law offers a free case review in English or Spanish at (310) 552-6959. You owe no fees or costs unless we win. Find more answers in our injury law FAQs.
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Related pages
Sources
- California Department of Insurance, Automobile Insurance guide (insurance.ca.gov)
- Texas Department of Insurance, Auto Insurance Glossary (tdi.texas.gov)
- Texas Department of Insurance, Auto insurance guide (tdi.texas.gov)
- CMS, Medicare's Recovery Process (cms.gov)
- 21st Century Ins. Co. v. Superior Court (2009) 47 Cal.4th 511 (Stanford SCOCAL) (scocal.stanford.edu)
- Cal. Civil Code 3040 (leginfo.legislature.ca.gov)
- Tex. Civ. Prac. & Rem. Code ch. 140 (140.002, 140.005, 140.008) (statutes.capitol.texas.gov)
- Tex. Insurance Code 1952.155 (statutes.capitol.texas.gov)
- Mahler v. Szucs, 135 Wn.2d 398 (1998), quoting Thiringer v. American Motors Ins. Co., 91 Wn.2d 215 (1978) (law.justia.com)
- Cal. Code of Regulations, title 10, 2695.7(q) (Cornell LII) (law.cornell.edu)
- WAC 284-30-393 (app.leg.wa.gov)
Important: This page is general information, not legal or medical advice, and reading it does not create an attorney-client relationship. Every case is different; talk to a lawyer about yours. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. Last reviewed: November 7, 2026.