Subrogation

Subrogation is a legal principle in which one party, typically an insurer that has compensated a claimant, assumes the legal rights of the claimant against a third party responsible for the loss. The insurer is said to subrogate to the insured’s claim. The right arises after the insurer pays a claim under an insurance policy, such as property, auto, or casualty coverage, and aims to recover the amount paid from the third party who caused the loss or their insurer. The mechanism reduces premium costs by discouraging careless conduct and prevents double recovery by the insured.

In practice, after payment, the insurer steps into the insured’s position and may sue the at-fault party to recover indemnity payments, adjusting for deductibles, policy limits, and any concurrent causes. Subrogation may be contractual (defined by the policy) or legal under applicable law; in some jurisdictions, equitable or statutory subrogation rules apply.

Limitations and exclusions include anti-subrogation clauses in contracts, which prevent one party from pursuing subrogation against another party in certain situations, and public policy restrictions, such as in employee benefits or workers’ compensation contexts. Subrogation is also common in healthcare and government programs where payers seek recovery from third parties responsible for medical costs.

Critical considerations include ensuring proper notice to the insured, preserving the insured’s defenses, and avoiding conflicts of interest. Subrogation does not change who bears loss initially; it reallocates recovery to the payer once a claim has been paid.