Subrogation is often explained as the carrier stepping into the shoes of the insured; the carrier has paid out for the loss, therefore the carrier is allowed to pursue the at-fault party for reimbursement for that payment.
A few elements are critical. First, a third party must be responsible for the loss. Next, the insurer must have compensated the insured for damages that the third party is actually liable for, and the insurer must be obliged to make this payment to protect its own interest and not just pay it voluntarily.
Subrogation happens frequently when an insured doesn't want to wait for the other carrier to work through the claim; the insured can file the claim through his carrier, pay the deductible and let the carrier collect from the other party. When the carrier does that, the insured's deductible will be returned to him. This allows the insured to be made whole for his loss, the principle of indemnity. Subrogation is readily seen in auto claims, and many insureds prefer to have their own carrier pay them and wait on the deductible reimbursement.
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Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.
