Subrogation, in the context of insurance, is the legal right of an insurer to pursue a third party who caused an insured loss, to recover the amount of the claim payment made to the insured. For instance, if a driver is at fault in a car accident, the injured party’s insurance company might pay for their damages and then seek reimbursement from the at-fault driver or their insurance company.
The opportunity to recover claim payouts is vital for insurance companies because it helps to control costs and keep premiums stable. Historically, subrogation has evolved as a principle of equity, preventing a claimant from receiving double recovery for the same loss (once from their insurer and again from the at-fault party). Furthermore, it ensures that the responsible party ultimately bears the financial burden of their actions.
