Subrogation

Subrogation supports the indemnity principle by preventing a policyholder from being paid twice, once by their insurer and again by the responsible party, and ensures the cost falls on whoever caused the loss.

For example, a driver's car is damaged by another driver who ran a red light. The driver's insurer pays 8,000 for repairs. Through subrogation, the insurer then pursues the at-fault driver, or more commonly that driver's insurer, to recover the 8,000. If the policyholder paid an excess, the insurer may also recover that amount for them.

Subrogation helps insurers control costs, which can help keep premiums lower. It is common in motor, property and health insurance.

Policyholders usually must not do anything that harms the insurer's subrogation rights, such as agreeing to release the responsible party from liability without the insurer's consent. Some contracts include waivers of subrogation, often in construction or leases, where parties agree that their insurers will not pursue each other.