You asked if it is legal for an auto insurance company to compel its insured to pay a deductible on car repairs required because of damage caused by another driver's negligence even though the insurer seeks the full damage amount from the negligent driver's insurance company.

SUMMARY

Connecticut law does not prohibit an auto insurance company from applying a deductible when it seeks other sources of recovery (i. e. , subrogates) in accordance with the terms of the executed insurance policy. If the insurer subrogates the claim, receives the full amount of damages from a third party, and there was no fault on the part of the insured, it is responsible for reimbursing the insured the deductible amount, according to the Connecticut Insurance Department. The department explained that if the at-fault party had paid for the repairs from the start without the insurer's involvement, there would have been no out-of-pocket costs to the insured, therefore, the insurer seeks to make its insured whole (assuming he was not at fault).

An insured must look to his policy to understand the insurance coverage, any applicable deductible, the insurer's duty to defend, and its right to subrogate. If an insured is concerned with how his insurance company handled a claim he may file a complaint with the Connecticut Insurance Department by calling the department's Consumer Affairs Division at (860) 297-3900 or 1-800-203-3447 or following the instructions found on the department's web site at http: //www. ct. gov/cid/cwp/view. asp?a=1272&q=254352.

SUBROGATION

Subrogation is where one person assumes the legal rights of another person for whom he has paid expenses or debt on their behalf. In terms of insurance, when an insurer is required to pay out money to an insured claimant, it is usually allowed to sue in the claimant's name against any person responsible for the loss. The insurer may also recover money from the claimant if the claimant received payment from a third party related to the same incident.

Subrogation is generally considered to be part of the law of restitution and prevents unjust enrichment. Insurance policies typically require the insured to cooperate with the insurer in pursuing subrogation against third parties. If the insured refuses, the insurer can sue the insured for breach of contract.

AUTO INSURANCE POLICY

The typical auto insurance policy covers direct and accidental loss to a covered auto, minus any applicable deductible. Most policies include a deductible. If a collision results in loss to more than one auto covered by the insured's policy, only the highest applicable deductible applies.

The insurer has a duty to defend its insured, which includes settling claims up to the limit of liability specified in the insurance policy. The limit is usually the lesser of the (1) actual cash value of the stolen or damaged property or (2) amount necessary to repair or replace the property with other property of like kind and quality. The policy typically allows the insurer to pay for the loss in money or repair or replace the damaged property.

The typical policy also allows an insurer to seek recovery from other sources (i. e. , subrogate) but specifies that even in this instance, the insurer will only pay its share of the loss.

HYPOTHETICAL

Assume that Driver X, who has an auto insurance policy underwritten by ABC, Inc. that contains a $ 250 deductible, sustains $ 1,000 of damage to his covered auto when Driver Y negligently causes a collision. Driver X submits a claim to ABC for $ 1,000. ABC pays $ 750 to have the vehicle repaired and Driver X is responsible for the other $ 250 (the deductible amount). ABC then performs its duty to defend and exercises its right to subrogate the claim, seeking to recover the entire $ 1,000 loss from Driver Y's insurance company or Driver Y himself if he was uninsured. When ABC receives the $ 1,000 from the third party, it retains $ 750 and reimburses Driver X his $ 250 deductible.

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