Subrogation

Subrogation is a legal right that allows an insurer to recover damages paid out on a claim from the third-party responsible for the damage. It is a common law doctrine that applies when an insurer has paid out damages for a claim covered by its policy and the insurer has the right to recover those damages from the third-party responsible for the claim.

Types of Subrogation:

• Implied subrogation: Arises automatically when an insurer pays out damages for a claim covered by its policy.
• Express subrogation: Occurs when an insurer expressly agrees to subrogate for a third-party insurer.

Process of Subrogation:

1. Notice of Subrogation: The insurer sends a notice to the third-party responsible for the damage, informing them that it has subrogated its rights to recover damages.
2. Investigation and Recovery: The insurer investigates the claim and gathers evidence to support its subrogation rights. It then pursues legal action against the third-party to recover damages.
3. Recovery of Damages: If the insurer prevails in its lawsuit, it can recover the damages paid out on the claim from the third-party.

Examples:

• An insurer pays out damages for a car accident caused by a third-party. The insurer can subrogate its rights against the third-party to recover damages.
• An insurer has an agreement with a third-party insurer to subrogate for claims covered by both policies. If an insured person makes a claim that is covered by both policies, the insurer can subrogate against the third-party insurer.

Key Considerations:

• Subrogation rights are limited to claims covered by the insurer’s policy.
• The insurer must have paid out damages before it has the right to subrogate.
• Subrogation rights are generally transferable to the insured.
• The insurer has the right to recover its costs of investigation and litigation.