Term of the Week: Subrogation

What It Is

Subrogation is the legal right of an insurer — after paying a covered claim — to step into the insured's shoes and pursue recovery from the third party whose negligence or action caused the loss.

Plain English: the carrier pays out, then goes after whoever is actually responsible to recover what it paid. The insured gets made whole; the carrier tries to get reimbursed.

Classic Property Claims Examples

• A plumber does shoddy work; the pipe fails and floods the unit below. The carrier pays the downstairs claim, then pursues the plumber (and their GL carrier).
• A roofer installs flashing incorrectly; chronic leaks cause interior damage. Carrier pays, pursues the contractor.
• A neighboring property's tree — with documented prior rot the owner ignored — falls and damages your insured's structure. Carrier pays, pursues the neighbor.
• A product defect (HVAC, appliance) causes a fire or water loss. Carrier pays, pursues the manufacturer under products liability.

Why the Adjuster's Day-One Work Matters

Subrogation lives or dies on documentation. If the adjuster doesn't capture the evidence that points to third-party causation — contractor invoices, prior complaints, product serial numbers, installation dates, photos of the failure point — the subrogation unit has nothing to work with.

Common documentation failures that kill recoveries:

• Damaged equipment removed and discarded before it's photographed and preserved
• Cause-and-origin not documented at the source (only at the loss location)
• Contractor information not collected at FNOL
• Photos that show the damage but not the defect that caused it

The Adjuster's Role

You don't have to identify a subrogation opportunity with certainty. You have to preserve the possibility. When causation could plausibly involve a third party — flag it, document it, and let the subrogation unit evaluate. The cost of over-flagging is a quick declination. The cost of under-flagging is a recovery that never happens.

On chronic leak and contractor-work claims especially: capture everything at the source. Subrogation is a downstream function. It runs on upstream documentation.