Subrogation

Category: Claims and policy principles · Reviewed by the Apex broking team · Last reviewed 2026-08-21 · ~3 min read

Definition

Subrogation is the doctrine by which an indemnity insurer, having paid a claim, acquires the right to enforce any remedy the insured has against a third party in respect of that same loss, and to receive any sum the insured recovers from that third party. The insurer sues in the name of the insured, not in its own name, because the cause of action still belongs to the insured. Subrogation applies only to contracts of indemnity; it has no application to life or personal accident cover, which are not indemnity contracts.

Where the right comes from

At common law the right arises automatically once the insurer has paid, and was set out in classic terms in Castellain v Preston (1883) 11 QBD 380, where the Court of Appeal held that every rule of insurance law exists to give effect to the indemnity principle and to prevent the insured recovering more than the loss. In marine insurance the right is codified: section 79 of the Marine Insurance Act 1906 gives the insurer, on payment for a total loss, the interest of the insured in whatever remains, and on payment for a partial loss the insured’s rights and remedies in respect of the subject-matter, to the extent of the payment. Non-marine policies almost always supplement the common law with an express subrogation and recovery clause, which typically allows the insurer to take over conduct of proceedings before as well as after payment.

What it means in practice

After a fire caused by a defective appliance, a property insurer that has paid the claim may pursue the manufacturer or the contractor who installed it. After a fleet accident, a motor insurer may recover from the driver at fault. In each case the recovery action is run by the insurer or its recovery agents, but the claimant on the record is the policyholder. That has consequences for the policyholder: correspondence arrives in their name, they may be required to give disclosure and evidence, and their commercial relationships with the target of the recovery may be affected.

The limits of the right

Three limits matter. First, the insurer cannot recover more than it has paid; any surplus recovered belongs to the insured. Second, the insured must not do anything that destroys or prejudices the insurer’s recovery rights — settling with, or granting a release or waiver to, the party responsible can amount to a breach of the policy and a defence to the claim. Third, where the insured has itself recovered from the third party, equity protects the insurer: in Lord Napier and Ettrick v Hunter [1993] AC 713 the House of Lords held that an insurer has an equitable lien over sums recovered by the insured, so the recovery is impressed with the insurer’s interest rather than left in the insured’s hands.

Waiver of subrogation and contractual controls

Commercial contracts frequently require one party to arrange insurance and to procure a waiver of subrogation in favour of the other, or to name the other as a co-insured or joint insured. Construction contracts are the common example. A waiver, once given by the insurer, prevents the recovery action against the protected party. Because the ability to give a waiver depends on the policy wording and on the insurer’s agreement, a contractual promise to obtain one should be checked against the policy before it is signed rather than afterwards. Related to this, an insured that signs hold-harmless or limitation-of-liability terms with suppliers may, without realising, be limiting its own insurer’s recovery prospects, which is why many policies require disclosure of such terms.

Subrogation and the claims process

Recovery prospects are one reason policies impose evidence-preservation and assistance obligations. A wording will normally require the insured to preserve damaged property, to give the insurer the documents it needs, and not to prejudice recovery rights — obligations usually found in the cooperation clause. The point at which the insurer becomes entitled to control a recovery is a matter of wording; some clauses allow the insurer to take over before indemnity has been paid.

Why it matters

Subrogation is the mechanism that keeps insurance an indemnity rather than a windfall, and it is the reason an insured cannot both claim on the policy and keep a separate recovery for the same loss. For a commercial buyer the practical points are narrow but important: do not release third parties without telling insurers, check any contractual waiver obligation against the policy, and expect to be involved in a recovery action that is nominally your own.

Frequently asked questions

Can my insurer sue in its own name after paying my claim?

No. The cause of action remains the policyholder's, so a subrogated recovery is brought in the policyholder's name, with the insurer controlling and funding it under the policy's subrogation clause.

What happens if I settle with the party who caused the loss?

Settling with, releasing or waiving your rights against the responsible party can prejudice the insurer's subrogation rights and give it a defence to your claim. Tell your broker or insurer before agreeing anything.

Does subrogation apply to all insurance?

It applies to contracts of indemnity, so to most commercial covers such as property, liability and motor. It does not apply to life or personal accident policies, which pay a fixed benefit rather than an indemnity.

Related entries

• Proximate cause
• Cooperation clause
• Notification of claim
• Reservation of rights
• Commercial insurance UK

This entry is part of the Apex Insurance Wiki. Last reviewed 2026-08-21. Next review: 2027-02-21. It is general reference information about UK insurance law and market practice, not regulated advice on a specific policy.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.