What Is Subrogation and How Does It Apply to Insurance?

Subrogation, in the context of insurance, is the right of an insurance company to “step into the shoes” of the insured after their company has paid the insured’s loss. Subrogation entitles the insurance company to assert any rights that the insured may have had, on its own behalf, in order to recover payment from the parties that actually caused the loss.

The topic of subrogation is loaded with nuance and there are too many fine points to cover here. These short explanations of how subrogation works in various types of insurance policies, however, should be helpful.

  1. In auto insurance, if you have collision coverage, your insurer will pay to repair your car regardless of whether you were at fault. If you were not at fault, though, your insurer would subrogate against the party who hit your car for the damages it paid out.
  2. In workers’ compensation, if a worker is injured operating a piece of machinery that malfunctions, the worker would be compensated for his injuries according the workers compensation laws of the state. The insurance company that paid out the workers compensation would be subrogated to the worker’s right to sue the manufacturer of the malfunctioning equipment and recover its payments.
  3. Property leases afford one of the most common appearances of subrogation and typically include mutual waivers of subrogation. In these clauses the landlord and tenant each agree to waive any rights of subrogation they may have against each other in the event a loss. Most insurance policies permit waivers of subrogation as long as the waiver has been agreed to before any loss occurs.

We’re here to help – and happy to elaborate. For additional information, please either call or email Barker Phillips Jackson at: 417-887-3550 or ins@bpj.com.