Subrogation

What is Subrogation?

Subrogation is, “The substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies, or securities.” (Black’s Law Dictionary 1595. 4th Ed. Rev. 1968). It is the ability for one party to assume the legal rights of another, typically by substituting one creditor for another or taking over a party’s right to sue.

The process of subrogation allows for one party to make a payment owed by another party and later collect that money from the party who originally owed it. The process functions in third-party claims, where a third party outside of the insurer and insured may be negligent. For instance, an insurance company may willingly step in to cover the costs for another insurance company in an accident to benefit their own customer. However, they would not be legally obligated to do so.

Beyond car accidents, subrogation can be done to cover costs such as medical expenses or property damage. The process greatly benefits insurance companies, as it prevents an insured party from being compensated multiple times for the same incident, and assists in recovering funds. Subrogation rights are outlined for an insured party in their insurance policy.