The principle which states that the guarantor is entitled to repayment for compensation that the guarantor has given to the creditor (principle of subrogation).
Financial Fervices Authority
What is the Principle of Subrogation?
Rules regarding subrogation can be seen in Article 1400 of the Civil Code. In this article subrogation is the substitution of rights by a third party who pays the creditor.
So, you could say subrogation is the principle of insurance that provides the right to claim compensation from the insured to the guarantor or the right to request compensation from third parties that causes losses.
Subrogation is generally applied in vehicle insurance policies as well as in property / accident and health care policy claims.
Application of Subrogation
Common cases related to subrogation, usually insurance companies directly pay their clients’ claims for a loss, then ask for compensation from other parties.
The insured client receives payment immediately by the insurance company; then the insurance company can file subrogation claims against the guilty party for the loss.
An insurance policy usually gives the insurance company the right, after the loss has been paid on the claim, to claim compensation from a third party if the party causes the loss.
The right of subrogation can be absolutely requested by the insurance party if the loss caused by an act of negligence of a third party.
However, not all subrogation rights can be done because the insurance company has its own consideration to use subrogation rights or not.
- In claims deemed to be total losses, the insured will receive full compensation
- If there is salvage, the remaining goods will become the property of the guarantor after the claim for the loss has been paid.
- The rest of the goods that have economic value can be sold and is Claim Recovery,which is also one of the subrogation rights.