Subrogation is a legal concept in insurance law that allows an insurance company to step into the shoes of the insured after the insurer has paid a claim. In other words, it gives the insurer the right to pursue the insured’s claim against a third party that caused the loss.
Importance of Subrogation
Subrogation is important because it helps insurance companies recover the costs of claims paid to policyholders. This can help keep insurance premiums lower for everyone. Additionally, subrogation can prevent the insured from being unjustly enriched by receiving payments from both the insurance company and the responsible third party.
How Subrogation Affects Policyholders
Policyholders should be aware of the subrogation clause in their insurance policies. This clause typically states that the policyholder must cooperate with the insurance company in any subrogation efforts. Failure to do so could result in the denial of coverage.
How Subrogation Affects Insurance Companies
For insurance companies, subrogation is an important tool for recovering costs and maintaining profitability. Insurance companies often have dedicated subrogation departments or hire third-party subrogation firms to handle these claims.
Conclusion
Subrogation is a complex but important concept in insurance law. Understanding how subrogation works can help policyholders and insurance companies navigate the claims process more effectively.