Legal Glossary
Subrogation
An insurer's right to pursue a third party that caused an insurance loss, after paying the insured's claim.
Legal Definition
Subrogation is the legal process by which an insurance company, after paying a claim to its insured, steps into the shoes of the insured to pursue a third party that caused or contributed to the loss. Once the insurer pays the insured's claim, the insurer acquires the legal right to sue the responsible party for reimbursement. Subrogation prevents double recovery — situations where an insured would collect both an insurance payout and a settlement from the at-fault party for the same loss.
In Plain English
Here's how it works: someone crashes into your parked car. Your own insurance pays for the repairs ($8,000). Your insurer then goes after the other driver's insurance company to recover that $8,000. That's subrogation. For you, the main implication is this: if you settle with the at-fault party on your own — accepting their payment and releasing them from liability — you may have waived your insurer's subrogation rights. That can give your insurer grounds to reduce or deny your claim, because you've blocked their ability to recover what they paid. Always notify your insurer before settling any claim involving a third party.
Real-World Example
Lisa's health insurer pays $50,000 for her medical bills after she's injured in a slip-and-fall at a grocery store. The store's negligence caused the accident. Lisa's insurer asserts its subrogation rights and files a claim against the store's liability insurer to recover the $50,000. Later, Lisa also receives a $120,000 personal injury settlement from the store. Under most health plans, Lisa must reimburse her insurer the $50,000 out of that settlement — she can keep the remaining $70,000 for her pain and suffering, lost wages, and other damages not covered by insurance.