Subrogation in insurance is the legal right of an insurance company to pursue a third party that caused an insurance loss to the insured in order to recover the amount it paid for the claim. Essentially, after an insurance company compensates its policyholder for a covered loss, it "steps into the shoes" of the policyholder to seek reimbursement from the at-fault party or their insurance company. This process helps the insurer recover the costs of the claim and can reimburse the insured for deductibles paid. Subrogation is commonly used in auto insurance but also applies to property, casualty, and health insurance claims.
How Subrogation Works
- The insured's insurance company pays the claim first to quickly cover the policyholder's losses.
- Then the insurer seeks payment from the responsible third party or their insurer.
- If successful, the insurer recovers the amount paid and may reimburse the policyholder’s deductible.
- This process speeds up claim settlement for the insured and shifts the financial burden to the party responsible for the loss.
Subrogation Types in Health Insurance
- Contractual Subrogation: Arises from insured agreements allowing insurers to recover from third parties.
- Legal Subrogation: Established by law when an insurer recovers costs from a third party responsible for injury.
- Equitable Subrogation: Allows recovery even without a legal or contractual basis when justified.
In summary, subrogation protects insured individuals and their insurers by enabling the insurer to recover expenses from the party liable for the loss, preventing the insured from bearing undue financial burden.
