Subrogation – How Does It Work

Weatherford lawyers and those in Springtown, Hudson Oaks, Aledo, Azle, Mineral Wells, Graford, Brock, and other places in Parker and Palo Pinto Counties need to have an understanding of subrogation any time they are dealing with a case involving insurance claims.
An insurance company who has paid an insured loss may be entitled to reimbursement from a third party that is responsible for causing the loss. This right of recovery arises under the equitable doctrine of “subrogation.” Some insurance policies also provide a contractual subrogation right.
Subrogation places one party in the place of another so that the new party gains the right of the former party regarding a claim. In this context, the insurance company “steps into the shoes” of the insured to pursue a claim against the tortfeasor.
One example of this is found in the case, “In re Romero,” a 1997, San Antonio Court of Appeals case. There a plaintiff sued a defendant in county court for damages arising from a car accident. Her insurer intervened and alleged that it had paid all or part of her damages and was thus subrogated to her recovery against the defendant to the extent of its payments. The plaintiff refiled her suit in district court, and the county court dismissed the cause of action with prejudice. The court held that the nonsuit order did not extinguish the insurer’s subrogation claim. From the point of payment forward, the court noted, the viability of the insurer’s part of the cause of action does not rise or fall with the fate of its insured’s part of the cause of action.
Subrogation is very confusing at times. Plus, the law regarding subrogation has changed in recent years. Furthermore, insurance companies are getting more aggressive in pursuing their rights of subrogation.
Too many people intentionally ignore subrogation rights an insurance company may have or do not understand those rights. The result is that they find themselves being sued for reimbursement of monies paid by their insurer. Very few people realize they may have an obligation to pay back these monies.
There are three types of subrogation: equitable, contractual (also called conventional), and statutory.
As the Waco Court of Appeals said in 2000, “There are three sources of subrogation rights recognized in Texas. Equitable, or legal, subrogation arises as a result of the equities between the parties, and is awarded as a matter of equity, not by right …. Contractual or conventional subrogation arises by virtue of an agreement between the parties and is awarded under that agreement, usually but not always, subject to the dictates of equity …. The third type, statutory subrogation, is a right created by statute and is governed by the terms of the statute under which it is claimed as a matter of statutory construction. The Waco case is Texas Association of School Boards, Inc. v. Ward.
This issue regarding subrogation rights cannot be emphasized too much. An experienced Insurance Law Attorney will understand how subrogation works but it is not an easy answer. The facts of the case are important in determining these rights. But also the language in the policy at issue is important. What cannot happen without the risk of a cost, is this subrogation right being ignored. Experienced attorneys can, in some cases, defeat the subrogation right. In most cases though, instead of defeating the subrogation claim, what happens is that the subrogation interest gets negotiated in such a way as to benefit the insured.