Subrogation and the right to be “made whole”

Insurers may not always be the deepest pockets in a covered loss.

Upon indemnifying a policyholder for a loss, an insurer generally has the right to recoup its loss by pursuing recovery from other entities or individuals who may be responsible for the policyholder’s damages in the first place. Subrogation rights vary across jurisdictions and can have serious consequences both for the policyholder and the insurer. Disputes often arise, such as the circumstances under which the insurer may subrogate and for how much, particularly where the policyholder has not been fully compensated for its losses.

Generally, an insurer’s subrogation rights are limited to recovering no more than what it paid to its policyholder. However, there is a disagreement among jurisdictions as to whether the insurer can recover in subrogation before the policyholder is “made whole.”