Glossary

Subrogation

An insurer's right, after paying a claim, to step into the policyholder's position and recover the loss from whoever caused it.

Also called: right of subrogation, subrogation rights, transfer of rights of recovery

Subrogation lets an insurer that has paid a loss pursue the party responsible for it. Say a contractor's torch starts a fire that destroys a tenant's inventory (hypothetical). The tenant's property insurer pays the $200,000 claim, then demands payment from the contractor and its liability insurer. The insurer stands in the policyholder's shoes, so it has only the rights the policyholder had, and the at-fault party can raise every defense it could have raised against the policyholder.

Standard forms put the policyholder under a duty. The ISO commercial property conditions (CP 00 90) and the CGL form (CG 00 01) each carry a "Transfer of Rights of Recovery Against Others to Us" condition requiring you to do nothing after a loss that impairs those rights. Signing a release with the at-fault party after a loss can cost you coverage. Contracts signed before a loss can waive subrogation if the policy allows, which is the subject of waiver of subrogation.

Policyholders have a stake because a deductible is part of the loss. Recoveries are usually shared with the insured, and many states apply a made-whole doctrine, under which the insured must be fully compensated before the insurer keeps anything unless the policy says otherwise. Workers' comp carriers subrogate against negligent third parties, too. The guide on subrogation in business insurance: how insurers recover and what it means for you covers the process.

Last reviewed October 10, 2026

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Related terms

Waiver of subrogation An endorsement in which an insurer gives up its right to recover a paid claim from a named party, usually one the policyholder contracted with. Indemnity The principle that insurance restores your financial position after a loss, no better and no worse; also a contract promise to make good another's loss. Deductible The amount of a covered loss the policyholder bears before the insurer pays, set in the policy and subtracted from the loss. Hold harmless agreement A contract clause in which one party agrees to take on another party's liability for specified claims, usually those arising from the first party's work. Insured contract A contract in which you assume another's tort liability, which the CGL covers despite its contractual liability exclusion if it fits a listed type.

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