Equitable Subrogation

Equitable Subrogation

Equitable Subrogation

Equitable subrogation arises by operation of law rather than contract, permitting a paying insurer to assert the insured's claims against a responsible third party or, in some circumstances, against another insurer.

The insurer's rights are no greater than the insured's would have been.

Alternative Names:

Insurer Subrogation, Equitable Subrogation Claim

Why it Matters?

In the coverage context, excess insurers use equitable subrogation to pursue a primary carrier that unreasonably refused a within-limits settlement, standing in the insured's position to assert the bad faith claim. That is the principal route by which excess carriers recover after funding a settlement the primary should have paid, and it is recognized in most jurisdictions even where the insured itself suffered no out-of-pocket loss.

Frequently asked questions

Can an excess insurer sue the primary carrier?

Can an excess insurer sue the primary carrier?

In most jurisdictions yes, through equitable subrogation to the insured's bad faith claim where the primary unreasonably refused a within-limits settlement.

Are the insurer's rights broader than the insured's?

Are the insurer's rights broader than the insured's?

No. A subrogated insurer takes the insured's claim subject to any defenses that would have applied against the insured.