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What is a Subrogation?

Mary McMahon
Updated May 17, 2024
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Subrogation is a legal concept which allows someone to take someone else's place legally. This concept most often occurs in the context of a debt, with a subrogee taking the place of the creditor, and the subrogee recovering the debt owed to the creditor. The insurance industry routinely uses subrogation to process claims, and it can also appear in some other contexts, such as real estate contracts.

In a classic example of subrogation, Sally gets into a car accident with Jane. The accident is Jane's fault, but Sally gets tired of waiting for Jane's insurance to pay out, and instead uses her own insurance to make repairs to the car. In this situation, Jane or her insurance company owe Sally money, because Jane is at fault for the damage. Sally is the creditor, and her insurance company becomes the subrogee, because it made a payout on her behalf and it wants to recover that money. Sally's insurer has the right to recover the debt from Jane or her insurance and to keep the funds as compensation for the money it paid out.

Subrogation is a routine part of many insurance policies, and it can be used in a variety of ways. For example, a car insurance company which pays out for health insurance may sue a driver's health insurance company to recover the funds it paid out. Likewise, if an injury occurs on the job, someone's health insurance company might sue a company which handles workers' compensation to recover funds paid out to address the work-related injury.

When a contract includes a subrogation clause, it allows someone to stand in legally for someone else. People should read such contracts carefully to ensure that they understand how and when such clauses can be applied. If people are not sure about how subrogation might apply to a particular contract, they should contact a lawyer for more information, and they should also be aware that subrogation can happen without specific consent, as when an insurance company takes action on behalf of someone it insures.

Subrogation can cause confusion and conflict in relationships when two parties end up on either side of a legal dispute. In the example with Jane and Sally above, for instance, if the two women are friends, the subrogation claim against Jane's insurance might cause Jane to become upset at Sally, even though the accident was demonstrably Jane's fault and Jane is genuinely responsible for the damages.

WiseGEEK is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By amysamp — On Sep 23, 2011

Subrogation makes sense. It should only be done in situations where there is good reason to do so though. When the companies, or subrogees, need the money, not just for the sake of suing someone and making a penny off of someone else.

These companies should get what is owed to them, as long as they aren't being greedy, just like we should get what is owed to us, as long as we aren't being greedy.

By indemnifyme — On Sep 22, 2011

@Azuza - Actually, subrogation isn't sneaky at all. An insurance policy is a contract between you and the insurance company. They are only obligated to cover what they say they will in the contract. If they've erroneously covered a claim, they have the right to go after your other insurance company. It probably says so right on your policy!

I think a lot of people don't understand that insurance companies aren't bottomless pits of money. If an insurer is covering a ton of claims, they may have to raise their rates. Only covering what is actually supposed to be covered helps them keep their costs down, and your rates too!

By Azuza — On Sep 21, 2011

I got a letter in the mail from a subrogation firm the other day. Apparently they work with my health insurance company. They wanted to know if any of my doctors office visits recently were related to a car accident of an on the job injury.

I assume if I said yes, the health insurance company would go after my auto insurance company for the money. Or tell me to file a workers comp claim, if that was the reason.

Either way, I think it's just a sneaky way for my health insurance company to get out covering stuff. But luckily, none of my recent doctors visit had to do with a car accident or at work accident, so I don't have to deal with it. Right now, at least.

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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