Subrogation is the insurer's right to step into your shoes and go after whoever actually caused your loss, after the insurer has paid your claim. In plain terms: your insurer pays you first, then tries to recover that money from the at-fault party (or their insurer). It prevents you from collecting twice for the same loss and shifts the cost back to the person who was truly responsible.

Why it matters

Subrogation keeps the system fair and helps hold down premiums. If your insurer can recover what it paid you from the at-fault party, the responsible party ultimately bears the cost—not your insurer (and, indirectly, not all the other policyholders). It also means you typically get paid promptly by your own insurer without waiting for a lengthy fault fight.

A simple example

Another driver rear-ends your parked car. You file a claim and your insurer pays to fix your car right away. Your insurer then exercises subrogation: it pursues the at-fault driver's insurer to get back what it paid you. Likewise, a workers compensation insurer that pays an injured employee may recover from a negligent third party, such as the maker of a defective machine.

Don't confuse it with…

Subrogation is not the same as the insurer simply denying your claim—your insurer does pay you, then chases reimbursement afterward. The insured must do nothing after a loss to impair the insurer's rights. A waiver of subrogation given in writing before a loss is allowed by ISO homeowners, dwelling and commercial property forms (commonly in leases and construction contracts); after a loss, the commercial forms allow a waiver only for certain related parties. Under the ISO Personal Auto Policy, the insurer cannot subrogate against a person using your covered auto with a reasonable belief of being entitled to.

On the exam

Anchor on the sequence: insurer pays the insured, then pursues the responsible third party. Key ideas to remember—subrogation prevents double recovery, the insured must not impair recovery rights after a loss, and pre-loss written waivers are permitted. It's a standard condition in property and casualty policies.