Subrogation

Definition

Subrogation is the legal right of an insurance company to pursue a third party that caused an insurance loss to the insured. After paying a claim, the insurer "steps into the shoes" of the policyholder to recover the payment from the responsible party. For example, if a neighbor's faulty water heater floods your home and your insurance pays for repairs, your insurer may pursue the neighbor's insurance for reimbursement. Subrogation can sometimes result in deductible recovery for the policyholder.