Adams Stirling PLC


Defined. Subrogation is a legal term describing a right exercised by insurance carriers. It is the right to sue a third party to recover monies paid by the insurance company on a claim. The carrier pays its insured for injuries or losses and then sues the party that caused them.

"Subrogation is defined as the substitution of another person in place of the creditor or claimant to whose rights he or she succeeds in relation to the debt or claim.' [Citation.] It provides a method of compelling the ultimate payment by one who in justice and good conscience ought to make it—of putting the charge where it justly belongs." (State Farm General Ins. Co. v. Wells Fargo Bank, N.A. (2006) 143 Cal.App.4th 1098, 1105.)

"In the case of insurance, subrogation takes the form of an insurer's right to be put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss which the insurer has both insured and paid.' [Citation.] 'The right of subrogation is purely derivative. An insurer entitled to subrogation is in the same position as an assignee of the insured's claim, and succeeds only to the rights of the insured. The subrogated insurer is said to "'stand in the shoes" of its insured, because it has no greater rights than the insured and is subject to the same defenses assertable against the insured. Thus, an insurer cannot acquire by subrogation anything to which the insured has no rights, and may claim no rights which the insured does not have.' [Citation.]" (Fire Ins. Exchange v. Hammond (2000) 83 Cal.App.4th 313, 317.)

"The essential elements of an insurer's cause of action for equitable subrogation are as follows: (a) the insured suffered a loss for which the defendant is liable, either as the wrongdoer whose act or omission caused the loss or because the defendant is legally responsible to the insured for the loss caused by the wrongdoer; (b) the claimed loss was one for which the insurer was not primarily liable; (c) the insurer has compensated the insured in whole or in part for the same loss for which the defendant is primarily liable; (d) the insurer has paid the claim of its insured to protect its own interest and not as a volunteer; (e) the insured has an existing, assignable cause of action against the defendant which the insured could have asserted for its own benefit had it not been compensated for its loss by the insurer; (f) the insurer has suffered damages caused by the act or omission upon which the liability of the defendant depends; (g) justice requires that the loss be entirely shifted from the insurer to the defendant, whose equitable position is inferior to that of the insurer; and (h) the insurer's damages are in a liquidated sum, generally the amount paid to the insured." (Fireman's Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279. 1292.)

"While the insurer by subrogation steps into the shoes of the insured, that substitute position is qualified by a number of equitable principles. For example, an insurer cannot bring a subrogation action against its own insured. ... [¶] The most restrictive principle is the doctrine of superior equities, which prevents an insurer from recovering against a party whose equities are equal or superior to those of the insurer." (State Farm General Ins. Co. v. Wells Fargo Bank, N.A. (2006) 143 Cal.App.4th 1098, 1106-1107.)

Waiver of Subrogation. The named insured's intentional relinquishing of any right to recover damages from another party who may be responsible. Such waivers are frequently found in the insurances provisions in an association's CC&Rs.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

Adams Stirling PLC