What is subrogation in real estate?

What is subrogation in real estate?


Subrogation in real estate refers to the legal process by which an insurance company, after paying a claim to its insured, steps into the shoes of the insured and seeks to recover the amount paid from a third party who may be responsible for the loss or damage. Essentially, subrogation allows the insurance company to pursue a claim against the party at fault to recoup the money it has paid out.

Understanding Subrogation in Real Estate

Subrogation is a common concept in the insurance industry and is also applicable in the realm of real estate. When a property owner experiences a loss or damage covered by their insurance policy, the insurance company will typically indemnify the owner by reimbursing them for the loss. However, the insurance company doesn’t want to bear the entire financial burden and will seek to recover the amount paid from any responsible third parties.

How Subrogation Works: When a property owner files an insurance claim for a covered loss, the insurance company will investigate the claim and, if approved, pay the owner for the damages. Once the payment is made, the insurance company is then subrogated to the rights of the property owner and can pursue legal action against any party that may have caused or contributed to the loss. This allows the insurance company to recover the amount it paid out, including deductibles, from the responsible party.

Examples of Subrogation in Real Estate: Subrogation in real estate can occur in various scenarios. For instance, if a property owner’s house is damaged due to a faulty electrical wiring installation by an electrician, the insurance company may pay the owner for the repairs and then pursue a subrogation claim against the electrician to recover the amount paid. Similarly, if a tenant accidentally causes a fire in a rental property, resulting in damage to the structure, the insurance company may pay the landlord for the repairs and then seek subrogation against the tenant to recoup the costs.

Benefits of Subrogation

Subrogation serves several important purposes in the real estate industry. Firstly, it helps insurance companies avoid shouldering the entire financial burden of a loss or damage caused by a third party. By pursuing subrogation, insurance companies can recover the funds they have paid out, which helps to keep insurance premiums more affordable for property owners.

Additionally, subrogation can act as a deterrent against negligent behavior. Knowing that their actions may lead to a subrogation claim can encourage individuals and businesses to act responsibly and take necessary precautions to prevent accidents or damage that could result in a claim.


Subrogation in real estate is a legal process that allows insurance companies to recover the amount they have paid out to property owners for covered losses. By stepping into the shoes of the insured, the insurance company can pursue a claim against any responsible third parties to recoup the funds. Subrogation benefits both insurance companies and property owners by ensuring that the financial burden is appropriately distributed and acts as a deterrent against negligent behavior.


– Insurance Information Institute: www.iii.org
– Investopedia: www.investopedia.com
– LegalMatch: www.legalmatch.com