DEFINITION of 'Subrogation'

A term denoting a legal right that is reserved by most insurance carriers. Subrogation is the right for an insurer to pursue a third party that caused an insurance loss to the insured. This is done as a means of recovering the amount of the claim paid to the insured for the loss.

BREAKING DOWN 'Subrogation'

An example of subrogation is when an insured driver's car is totalled through the fault of another driver. The insurance carrier will reimburse the covered driver under the terms of the policy and then pursue legal action against the driver at fault. If the carrier is successful, it must divide the amount recovered after expenses proportionately with the insured to repay any deductible paid by the insured.

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