Subrogation

The term subrogation generally refers to a person’s substitution in the position of another to pursue a lawful right, demand, or claim, in order that the person who surrogated succeeds to the other’s rights as pertaining to claims or debt, and the corresponding securities, remedies, and rights. Subrogation is accomplished to ensure payments of debts from an individual who has the obligation to pay it. The two types of subrogation are conventional and legal subrogation. Conventional obligation originates from contracts, while legal subrogation is derived from law.

The types of subrogation are indemnity insurer’s subrogation rights, surety’s subrogation rights, lender’s subrogation rights, banker’s subrogation rights, and subrogation rights versus trustees.

In insurance, the word subrogation means a reserved legal right by most insurance companies or carriers. It is regarded as the insurer’s right to chase a third person who resulted to the insured individual’s loss. The purpose of subrogation is to recover the claim amount paid to the party insured for the damage.

Subrogation happens, for instance, when one’s car has been totally damaged due to another person’s fault. Here, the insurance company will then indemnify the former for the cost of damages according to the policy and subsequently will take up legal proceedings against the latter. Once the insurance company succeeds in the lawsuit, the recovered amount less expenses must be divided proportionately with the person insured to serve as a repayment from any deductibles shouldered by him. The insurance company here is termed as the subrogee, while the person insured is regarded as the subrogor. This case is an example of indemnity insurer’s subrogation rights.

In the same situation above, if the injured person files a lawsuit against the person at fault, he/she is not allowed to receive compensation for the damages as far as how much the insurance company paid. Thus, he/she cannot recuperate twice on behalf of the same damage since he/she is only allowed to receive whichever from the insurer which is the insurance company, or the person causing the harm, but not from both. Therefore, double recovery is prohibited in insurance subrogation.

In simpler terms, subrogation in insurance denotes to situations wherein the insurance company strives to recover expenses paid out of a claim when in fact, another party is obligated to pay such, or as a minimum, a part of it. Subrogation can take place without any agreement by the insurance company and the insured person regarding the latter’s transfer of rights. Subrogation is also considered as an equitable remedy which is conditional on certain limitations.

Sometimes, the insurance company is called as the “collateral source”, representing someone standing in the shoes of the insured person. The said collateral source must not possess greater rights than those held by the party entitled to obtain the benefits. Similarly, all actions to be accomplished against the insured person could likewise be applied to the collateral source.

Insurance programs from the government also take in subrogation rights, including Medicare, Medical Assistance, Veteran’s benefits, state assistance plans, and Federal worker’s compensation.