Definition of subrogation

Subrogation refers to an insurance company pursuing reimbursement from the person or entity legally responsible for an accident. Then the insurer has paid out money on behalf of its insured. This could include any money paid out for property damage, deductible amounts, diminished value, pain and suffering, loss of consortium, etc.

Explanation

We can understand its principle by an example. If a person is in a car accident and that person’s car insurance policy covers both the damage to his car and personal injuries. He, calls his insurance company, files a claim and they pay all of his expenses relating to the accident.

If the other party in the accident caused the damage. Then that person’s insurance company can get reimbursement from the other driver’s insurance company. Since its insured was actually at fault for the accident. This process of reimbursing the person’s insurance company for the bills it covered is known as subrogation.