Subrogation

The word “subrogation” derives from the Latin “subrogare,” which could be used to mean “to put one person in the place of another.” (Martinez 650) In the case of the insurance company, they can “stand in the shoes” of their insured and sue the 3rd party at fault. When the insurance company pays its insured for a claim that the insured has against a 3rd party for causing a loss, i.e., a car crash, the insurance company has an equitable right of relief. It may seek compensation from the 3rd party that caused the accident. This process of standing in the shoes of the insured to seek compensation is known as subrogation.

Some have argued that this gives the insurance companies a windfall, as they are double-dipping from the insured’s premiums as well as recovering from the tortfeasor. There are some limitations to subrogation. As it was so eloquently put, “Subrogation was begotten of a union between equity and her beloved—the natural justice.....this child of justice is without form of a rigid rule of law...To some facts, subrogation will adhere—to others, it will not.” (Martinez 659) In the case of Sutton v. Jondahl, we learn that the insurer may not subrogate against their own insured. This case, however, has been criticized by naming the tenant as a co-insured when they were not an additional insured in the policy. The Wimberly principle (Wimberly v. American Casualty Company of Reading, Pennsylvania) further cements the idea that the insured must be made whole before the insurer can recover or is entitled to reimbursement. Subrogation in a car accident usually takes place behind the scenes and the insured is most likely not aware of the process. But insurance companies have and continue to recover from other insurance companies or the 3rd party themselves.

Martinez,Leo, Richmond,Douglas. Martinez and Richmond's Cases and Materials on Insurance Law, 8th Edition. West Academic Publishing, 12/2017.