When does an insurer earn the right to subrogate a claim?

Subrogation is a legal concept that allows an insurer to pursue a third party for recovery of funds after it has paid a claim to its insured. The insurer earns the right to subrogate a claim when it pays the insured's loss. This means that once the insurer fulfills its obligation to cover the loss, it can seek reimbursement from the party that caused the damage or loss.

This right allows the insurer to recover funds and mitigate its own losses, ultimately helping to keep premiums lower for policyholders. The premise of subrogation is based on the idea that if someone else is liable for the insured's loss, then the insurer should be able to seek compensation from that party after it has taken on the financial responsibility to cover the insured’s damages. In contrast, simply denying a claim or declaring it fraudulent does not provide a basis for subrogation, as no payment has been made. Similarly, an insured’s noncompliance with the policy does not create grounds for the insurer to subrogate, as subrogation arises only after the insurer has settled the claim.