While insurance policies differ depending on what exactly is being insured, many have similar clauses. All policies have clauses identifying what is covered, what perils are covered, what perils are excluded, how settlement is to be made, and other provisions. One of these common provisions is the subrogation provision. Insurance companies have departments of employees handling subrogation files. But what exactly is subrogation?
Subrogation is often explained as "stepping into the shoes of another". Merriam-Webster online defines it as: "the assumption by a third party (such as a second creditor or an insurance company) of another's legal right to collect a debt or damages". What this means is that if the insurance company paid a claim to an insured that another party should have paid, that the insurance company can "step into the shoes of" the insured, and pursue that other party for reimbursement of the funds it paid to the insured.
Policies do not define the term directly, but do provide some explanation. In the ISO Personal Auto policy it reads:
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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.