Subrogation is the legal technique by which one party, commonly an insurer (I-X) of another party (X), steps into X's shoes, so as to have the benefit of X's rights and remedies against a third party such as a defendant (D). Subrogation most commonly arises in relation to policies of insurance, but the legal technique is of more general application. Using the designations above, I-X (the party seeking to enforce the rights of another) is called the subrogee. X (the party whose rights the subrogee is enforcing) is called the subrogor.
In each case, because I-X pays money to X which otherwise D would have had to pay, the law permits I-X to enforce X's rights against D to recover some or all of what I-X has paid out. A very simple (and common) example of subrogation would be as follows:
- D drives a car negligently and damages X's car as a result.
- X, the insured party, has Collision insurance, and claims (i.e., asks for payment) under his policy against I-X, his insurer.
- I-X pays in full to have X's car repaired.
- I-X then sues D for negligence to recoup some or all of the sums paid out to X.
- I-X receives the full amount of any amounts recovered in the action against D up to the amount to which I-X indemnified X. X retains none of the proceeds of the action against D except to the extent that they exceed the amount that I-X paid to X.
If X were paid in full by I-X and still had a claim in full against D, then X could theoretically recover "twice" for the same loss. However, the basis of the law of subrogation is that when I-X agrees to indemnify X against a certain loss, then X "shall be fully indemnified, but never more than fully indemnified ... if ever a proposition was brought forward which is at variance with it, that is to say, which will prevent [X] from obtaining a full indemnity, or which will give to [X] more than a full indemnity, that proposition must certainly be wrong."
I-X will normally (but not always) have to bring the claim in the name of X. Accordingly, in situations where subrogation rights are likely to arise within the scope of a contract (i.e. in an indemnity insurance policy) it is quite common for the contract to provide that X, as subrogor, will provide all necessary cooperation to I-X in bringing the claim.
Subrogation is an equitable remedy and is subject to all the usual limitations which apply to equitable remedies.
Although the basic concept is relatively straightforward, subrogation is considered to be a highly technical area of the law.