Subrogation – What Is It?

Someone in Grand Prairie has their insurance company pay a benefit for them. Or maybe the person is in Arlington, Dallas, Fort Worth, Mansfield, or out in Weatherford, Texas. When a claim is paid by a person’s own insurance company, and the claim resulted from the fault of another person or company, then the person’s own insurance company has a subrogation right. Well, what does that mean to you?
One web-site defines subrogation as the substitution of one person in the place of another with reference to a lawful claim or right. Subrogation commonly occurs in insurance matters, when an insurance company which pays its insured client for injuries and losses then sues the party which the injured person contends caused the damages.
There are three types of subrogation: equitable, contractual, and statutory.
Here is equitable subrogation as stated in the case, Lexington Insurance Company v. Gray, in 1989, by the appeals court in Austin, Texas. “Equitable subrogation arises by operation of law.” While insurance contracts typically give an insurance company a right of subrogation, when it pays a loss, it is equitably subrogated to any right the policyholder may have against the person causing the loss, whether or not the policy provides expressly for subrogation.
This equitable subrogation is granted the insurance company because otherwise the policyholder would receive a double recovery, upon payment by the wrongdoer, which the law does not sanction. This was stated by the Texas Supreme Court in, Ortiz v. Great Southern Fire & Casualty Insurance Company, in 1980.
Contractual subrogation – also called “conventional” subrogation – arises by contract between the parties. Some, or most, insurance policies expressly provide a subrogation right to the insurance company and the policy language addresses its scope and limits.
The third kind of subrogation is called, statutory subrogation. Statutory subrogation is a right created by law, or written statute, and is governed by the terms of the statute under which it is claimed as a matter of statutory construction. This is discussed in the case, Texas Association of School Boards, Inc. v. Ward, by the Texas appeals court in Waco, in 2000.
An experienced Insurance Law Attorney can help with these subrogation issues. It is important that these issues are handled properly. Failure to properly handle these issues is actually a criminal offense as it relates to some government subrogation rights. At the least, failure to properly handle subrogation issues can be a financial hardship. There are large numbers of people who collect benefits from their own insurance company, then settle with the people who caused the loss without the assistance of an attorney. Later, they are contacted about these subrogation rights and find themselves in legal and financial trouble.