What is a subrogation clause?

A subrogation clause is a provision in an insurance policy that allows an insurance company to transfer its rights to recover payment for a claim it paid to the policyholder to another party. In other words, an insurance company may pursue reimbursement from a third-party who was legally liable for a covered loss instead of the policyholder. Subrogation clauses can be found in many kinds of insurance policies and are a common feature of liability insurance in Texas. When a subrogation clause is invoked in Texas, the insurance company is essentially acting as the policyholder’s “assignee.” This means the company can pursue legal action against the responsible third-party to recover the funds they paid out on behalf of the policyholder. The third-party may be another individual, a business, or even a government agency. The insurance company will typically require the policyholder to cooperate with their attempts to pursue reimbursement, which may include signing paperwork, providing documents, or testifying as a witness. Subrogation clauses are important because they help ensure that insurance companies are able to recover the money they have paid out in claims. This benefits policyholders because it helps keep insurance costs down by avoiding raising premiums to cover losses. It also benefits those who are not insurance policyholders, as it helps keep their insurance premiums down as well.

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What is a subrogation clause?

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