Subrogation Principle
What Does Subrogation Principle Mean?
The subrogation principle refers to a legal right held by most insurance companies. It is an important component of many property insurance policies, stating that if a third party damages the insured’s property, the insured must transfer their right to sue the third party to the insurance company before they can receive payment for their claim. By accepting the payment, the insured agrees to transfer this right to sue.
Insuranceopedia Explains Subrogation Principle
The subrogation principle enables insurance companies to recover losses after paying a claim. When an insurer compensates an insured party for damages, it seeks to recoup the payout by suing the responsible party. However, the insurance company cannot initiate legal action until the insured transfers their right to sue. To facilitate this process, the subrogation principle is included in the terms of most insurance policies. By accepting the claim payment, the insured automatically transfers their right to sue, allowing the insurance company to proceed promptly with legal proceedings.
