What to do about an insurance subrogation?

Subrogation is the legal doctrine whereby one person takes over the rights or remedies of another against a third party. Rights of subrogation can arise two different ways: either automatically as a matter of law, or by agreement as part of a contract. Subrogation by contract most commonly arises in contracts of insurance. Subrogation as a matter of law is an equitable doctrine, and forms part of a wider body of law known as unjust enrichment. The two most common areas where subrogation is relevant are insurance and sureties. In each case, the basic premise is that where one person (i.e. typically an insurer or a guarantor) makes a payment on an obligation which, in law, is the primary responsibility of another party, then the person making the payment is subrogated to the claims of the person to whom they made the payment with respect to any claims or remedies which are exercisable against the primarily responsible party. For example, if a car owner has collision insurance on their car and the car is damaged by a negligent third party, if the car owner elects to claim under his insurance policy, then any claims which the car owner had against the negligent party will pass to the insurance company in jurisdictions which recognise the doctrine. Similarly, if a father guarantees the debts of his son to the bank (i.e. a contract of suretyship), and the bank elects to call upon the guarantee rather than claiming against the son directly, then if the father pays out on the guarantee, he will become subrogated to the bank's claims against the son.

The doctrine of subrogation can also pass proprietary rights, i.e. a security interest or claim to ownership of goods. If a work of art is stolen, and the insurance company pays out under a policy of insurance to the owner, if the art is later recovered, then legally it will belong to the insurance company under rights of subrogation. Similarly, if a ship is insured and then sinks, any rights of salvage will pass to the insurer if the claim is paid out as a total loss. If a guarantee is paid out by a guarantor, but the bank also held a mortgage over the debtor's home, then the guarantor will be subrogated to the bank's rights as a mortgagee with respect to the debtor's home.

In the most common areas where subrogation arises as a matter of law, it will also commonly be regulated in the terms of the relevant contract. For example, in a contract of guarantee, the guarantee will often provide that the guarantor either waives their right of subrogation, or agrees not to exercise it unless the bank has completely been paid in full. In a contract of insurance, in addition to right of subrogation at law, there will often be a contractual right of subrogation which will be bolstered by the insured party agreeing that they will provide all necessary assistance to the insurance company in pursuing any subrogated claims.

Subrogation is sometimes misunderstood by lay people and criticised on the basis that payment under an insurance claim is simply a right based upon their payments of insurance premiums, and a belief that they should also retain a right to exercise any claims arising from the insured event. However, an insurance contract is a contract of indemnity, and to allow a party to receive insurance proceeds and claim against third parties would mean that they might recover more than their total loss. Because subrogation operates to prevent such over-recovery, it is considered to form part of the general law of unjust enrichment (i.e. preventing a party by being unjustly enriched by pursuing a claim for a loss in respect of which they have already been indemnified).

Subrogation is an equitable remedy and is subject to all the usual limitations that apply to equitable remedies.

Answer: I suggest that you consult with a subrogation attorney in your locality for assistance. One can be found on attorneypages.com.