The Equitable Right of Subrogation
Subrogation is an equitable right to seek recovery of losses paid by the plaintiff for another in an action against the party that caused the losses. In insurance law, subrogation refers to the right of the insurer to seek compensation for its payments to its insured by filing an action against the person that caused the damages to the insured.
For example, if an insurer pays its policyholder for damages to the policyholder’s automobile damaged in a collision that was the fault of another driver, the insurer has the equitable rate of subrogation. In effect, the insurer has the right to step into the policyholder’s shoes and file an action against the other driver for the amount of the damages paid by the insurer.
Subrogation is an equitable right available to any party that in fairness should be allowed to seek to recover damages from a third party. Subrogation also is often included in insurance policies in the form of a condition under which the insured must agree to assign to the insurer any right of action which the insured may have against a third party regarding damages paid by the insurer.
In order to obtain equitable subrogation, an insurer must show:
- A claim has been paid on behalf of a policyholder for a loss;
- The loss of the policyholder was caused by a defendant or by someone for whom the defendant is responsible;
- A cause of action of the policyholder arises from the loss;
- The right of action may be assigned to the insurer;
- The act or omission on which the liability of the defendant is based has caused the insurer to suffer loss;
- The equitable position of the defendant is less than the equitable position of the insurer so that fairness requires shifting the loss of the insurer to the defendant; and
- The damages or loss of the insurer can be specified, normally as the amount of the payment made to the insured.