Subrogation is one of those insurance terms that few in the industry pay attention to until a specific claim arises. But every insurance company needs to understand how subrogation works before they need to use it. If your company has questions about New York insurance law, you can count on our experienced insurance coverage attorneys at Rosenbaum & Taylor. Our firm provides legal advice and representation to insurers and helps them assert their rights.
What Is Subrogation?
Subrogation allows an insurance company to recover funds paid for a claim by pursuing the party that caused the loss. When an insurer does this, it is said to “stand in the shoes of the policyholder.” This allows the insurer to have the same rights and remedies as the insured when seeking compensation for the loss.
Consider a property damage insurance policy as an example. The policyholder suffers a loss to real or personal property that is covered under the insurance policy. When the insured makes a claim, the insurer then pays the claim according to the policy. Usually this is either the value of the property at the time of loss or the cost to replace it.
After the claim is paid by the insurance company, it can go after the third party that caused the loss. By paying the policyholder’s claim, the insurer is subrogated to the policyholder’s right to recover from the third party. Subrogation allows the insurer to recover the full amount paid. It also allows the insurance company to recover from the third party’s insurer, if applicable.
The insured must have a right to recover from the third party from which the insurer wants to recover. If the policyholder could sue the third party for negligence, for example, then the insurer can do so through subrogation. Ask a New York insurance coverage attorney if you have questions about your company’s right to subrogation remedies.
Issues That Arise In Subrogation Cases
Other important issues that may arise in subrogation lawsuits include the following:
- Waivers of subrogation. Parties to an agreement may give up the rights of their insurer to sue to recover an insured loss. Not all waivers of subrogation are enforceable. For instance, a waiver that goes against public policy or contravenes a statutory right of subrogation won’t be enforced.
- Statute of limitations. In New York, most subrogation claims are subject to a three-year statute of limitations, beginning with the date of loss. Failing to file within that time period could invalidate the claim altogether.
- Whether the anti-subrogation rule applies. Insurers cannot bring subrogation claims against their own insureds, a long-standing policy meant to prevent conflicts of interest. The defendant in a subrogation lawsuit cannot invoke this rule unless it is insured under the policy in some manner. A 2017 New York Court of Appeals case clarified this principle, but it still causes some confusion among insurers.
- Whether the insured was made whole. New York’s “made whole” rule requires the insured to be fully compensated before the insurer can pursue subrogation. This rule does not apply in every instance; for example, to a salvage recovery for property damage.
Let Us Help With Your Insurance Subrogation Needs
These are not the only issues that may arise concerning subrogation. If you’re concerned about your company’s subrogation rights, turn to an experienced New York insurance coverage attorney. Our firm can review your rights and answer some of the most common questions. We can also explain whether there are any contractual limitations that may restrict or prohibit subrogation. Our goal is that our insurance clients fully understand their legal remedies and use them where necessary. Rosenbaum & Taylor can help make that happen. Reach out to us today for a consultation.