Principle of Subrogation - Insurance Contract, Principles of Insurance Video Lecture | Principles of Insurance - B Com

A standard insurance policy has several clauses
and conditions to the coverage it provides,
and subrogation is one of those clauses found
in many policies.
But what is subrogation? It's easiest to
explain using an example.
Let's assume your new dishwasher catches
on fire due to mechanical problems and causes
significant damage to your home. Because fire
is a covered cause of loss in your homeowners
policy, your insurance company will pay for your loss up to the limits stated in your
policy, minus your deductible.
Since faulty wiring by the dishwasher
manufacturer caused the loss, the manufacturer
is ultimately responsible for your damages.
Because your insurance company paid you for
the loss, they have the right to try and recover
their payment for that loss from the dishwasher
manufacturer. This is subrogation.
Now normally, you would have a claim against
the dishwasher manufacturer. However, as soon as your insurance company pays you for your
damage, your claim against the manufacturer is transferred,
or assigned, to your insurance company.
Your insurance company may have you sign a subrogation receipt. This confirms the amount
of your loss, the company's assignment for what they paid, and your agreement to assist
the company in recovering their payments for
the loss.
If your insurance company recovers the full amount they paid you they will refund you
the amount of your deductible.
If the full amount is not recovered, you will
be reimbursed for the amount of your deductible proportionate to what your insurance company
recovered.
If you suffered damages that were NOT paid
by the insurance company, You still have the right to seek payment from the dishwasher
manufacturer. However, your insurance company will not be able to help you recover those
additional expenses because they have no legal interest or recovery rights for the damages
they did not pay.
So back to our insurance policy. The subrogation
condition will typically indicate if you have
the right to waive subrogation prior to a loss
and will indicate the insurance company's
right to a claim against responsible parties
for losses the company has paid for.
The subrogation condition will also outline
your responsibility in cooperating with your
insurance company in their subrogation efforts
for losses they have paid.
When you are attempting to collect out-of-pocket
expenses against someone responsible for your
damage, make sure you don't release that
party from any other damages they are responsible
for.
Doing so, may violate your policy's subrogation
condition, eliminating your insurance company's
recovery rights, preventing them from paying
your claim!
If you have questions about the subrogation
clause in your insurance policy, contact your
independent insurance agent to learn more!