Subrogation is the right for an insurer to pursue a third party that caused an insurance loss to an insured. It is a provision that is common in many insurance policies, and one that we, at Homer Smith Insurance, often find ourselves explaining to customers. There are many times that an insurance company settle a loss under a liability policy, but someone else is actually responsible. Subrogation can be used in a variety of ways but the following is a classic example:
William and Harry get into a car accident. The accident is Harry’s fault, but William gets tired of waiting for Harry’s insurance to pay for the damages, so he uses his own insurance to make repairs to his car. In this situation Harry or his insurance company owes William the money, because Harry is at fault for the damage. William’s insurance company becomes the subrogee, as it has paid for the damages. William’s insurer has the right to collect from Harry or his insurance company and keep the funds as compensation for what it paid out.
The effort to recover payment made by William’s insurance company illustrates “subrogation”. Most automobile insurance professionals in Washington understand the importance of subrogation. Once an insurance company claims this right, it can pursue recovery from another person (including other entities such as partnerships or corporations) who is actually responsible for a loss.
When a contract includes a subrogation clause, it allows someone to stand in legally for someone else. There are many types of subrogation clauses. If people are not sure about how subrogation might apply to a particular contract, they should contact an attorney for more information.
When subrogation is used, it helps to keep everyone’s insurance costs down. It also attempts to insure that liability insurance policies work as intended – by making sure that those parties who cause losses are the ones that end up paying for them.