Subrogating

Subrogating is the act by which one party, typically an insurer or guarantor, assumes the legal rights of another party to pursue recovery from a third party responsible for a loss, after compensating the injured party. Subrogation arises by contract or by operation of law and serves to prevent double recovery and to allocate loss to the party at fault.

In insurance, when a insurer pays a covered claim to or on behalf of the insured, the insurer acquires the insured’s rights against the at-fault party. The insurer may then sue the responsible party or that party’s insurer to recover the amount paid, less any applicable deductions. The insured generally remains the beneficiary of the underlying claim, but the subrogated insurer’s recovery reduces or eliminates the insured’s potential liability for the same loss.

Subrogation can arise under contractual provisions in insurance policies or by statutory or equitable rules. The two main forms are contractual subrogation, stemming from policy terms, and legal or equitable subrogation, arising from law or equity. Subrogation rights can be limited by policy exclusions, anti-subrogation clauses, or public policy concerns. Time limits, notice requirements, and prerequisites to pursue a claim may apply, depending on the jurisdiction and policy language.

Impact and purpose: subrogation aligns incentives for fault correction, helps keep insurance premiums reasonable, and supports efficient loss allocation by transferring recovery rights to the party best positioned to pursue them. It can affect the insured’s own recovery and influence settlement dynamics in multi-party claims.