What Is Subrogation In California?

Subrogation is the right of an insurance company to go after someone who caused damage to your property.

Subrogation is a fancy word for reimbursement.

Let’s talk about subrogation in the context of property damage.

Consider this example. A utility company negligently starts a fire that burns down your home. Your home insurance pays you $850k for the damage. Then your insurance tries to get the $850k from the utility company. That’s subrogation.

Two things must occur before subrogation happens:

1) the insurance company pays you for damages covered by an insurance policy (the $850k); and

2) those damages were caused by a third party (the utility company who negligently started the fire that caused $850k worth of damage to your home).

Here are some things you should know.

Subrogation Principles

Subrogation can be understood as an assignment of rights from the insured (you) to the insurance company against a third party who was responsible for the loss the insurance company had to pay. See Royal Indem v Security (1963) 52 CA4th 533.

The insurance company’s subrogation right is limited to the amount of payment it made to the insured (you). See Kardly v State Farm (1989) 207 CA3d 479.

And the insurance company cannot subrogation against any insured. For example, a general contractor’s insurance company cannot subrogate against a subcontractor under a policy that covered both the general contractor and the subcontractors. See St Paul Fire & Marine Ins Co v Murray Plumbing (1976) 65 CA3d 66.

Generally, the insured (you) should not do anything to limit the insurance company’s right to subrogation. The insurance company, however, must follow the Made Whole Doctrine. 21st Century Ins Co v Superior Court (2009) 47 Ca4th 511 also discusses the made whole rule in the context of subrogation.

Subrogation Defenses

Doctrine of superior equities is a confusing and older defense, but it’s still valid. That doctrine says that unless an insurance company can show that the third party is more at fault than its insured, subrogation will not be allowed. See Meyers v Bank (1938) 11 CA2d 92. There are newer cases that discuss the doctrine.

An insurance company cannot subrogation if it commits bad faith. See Commercial Union v Ford Motor Co (1984) 599 F.Supp. 1271.

An insurance company cannot subrogate against personal rights, like bodily injury claims. See Fifield v Finston (1960) 54 Cal2d 632.

Subrogation can be waived. See Liberty Mutual v Auto Spring (1976) 59 CA3d 860.