What Is the Principle of Subrogation in Insurance

What Is the Principle of Subrogation in Insurance

Subrogation is a part of all indemnity claims.

Indemnity means compensation paid by the insurance company to the policyholder for the loss/damage suffered.

Right of Subrogation finds mention in Section 79 of the Marine Insurance Act, 1963.

When a third party causes any damage or loss to you, you hold certain right over that wrong-doer third party.

If you are an insurance policyholder you can claim compensation from the insurer for that loss.

To make up for the compensation paid, your insurer can claim the (insured) right over that third party. You surrender your rights over the third party to the insurer. 

This transfer of all the rights, and remedies, from insured to insurer is called subrogation.

So how does subrogation help the insurer?

The insurer can collect from the third party, the amount of damage. This amount should not be more than what the insurer has paid to the insured.

Surrender of rights make sure that the insured does not get paid twice, one from the insurance company, and other from the third party.

You, as the insured, can still sue the wrong-doer. Subrogation does not put an end to the right of the insured to sue the wrong-doer, and to recover the damages for the loss.

However, it will be the insurer who will receive the amount that is paid after suing the third party. 

Any plaint, complaint, or petition for recovery of compensation can be filed in the name of the insured. Both the insured and the insurer can be the co-complainants.

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