What is Subrogation in Insurance?

Subrogation is the right of an insurer that has paid a claim to take over its policyholder's rights against a third party responsible for the loss, and to enforce them in the policyholder's name.¹ It stops a policyholder from being paid twice for the same loss.²

This entry explains how subrogation works under English law: where the right comes from, how it differs from salvage and contribution, how a recovery is shared between insurer and policyholder, what waivers, co-insurance and market agreements do to it and what the leading cases decided. It describes the law and the published data; it is not legal advice.

How a subrogated recovery works

In the Supreme Court's 2026 description, indemnity insurance functions only as a backstop, so the insurer is entitled to the benefit of any sum received or receivable from a third party in diminution of the loss.¹ Where the insurer has indemnified the policyholder and the policyholder still has an unsatisfied right to claim compensation from a third party, the insurer can take over that right of action and enforce it in the policyholder's name. The court said it would be clearer to confine the word subrogation to this situation.¹

If the responsible party is insolvent, section 1 of the Third Parties (Rights against Insurers) Act 2010 transfers its rights against its own liability insurer to the person to whom it is liable. That person may bring proceedings against the insurer without first establishing the insolvent party's liability, but cannot enforce the transferred rights until the liability is established, by a declaration, a judgment, an arbitration award or an enforceable agreement.³

Where the right comes from

Subrogation in English insurance law rests on the principle of indemnity. In Castellain v Preston (1883), Brett LJ described as the very foundation of insurance law the rule that a marine or fire policy is a contract of indemnity only, under which the assured is to be fully indemnified but never more than fully indemnified.²

The case concerned a house damaged by fire after its owners had contracted to sell it but before completion. The owners received the insurance money, and the sale then completed at the agreed price with no reduction for the fire damage. The Court of Appeal, reversing Chitty J, held that the insurer was entitled to recover a sum equal to the insurance money from the vendors.² The headnote states the doctrine broadly: the insurer is entitled to the advantage of every right of the assured, whether in contract, in tort or otherwise, by which the loss can be or has been diminished.²

For marine insurance, the rule is in statute. Section 79 of the Marine Insurance Act 1906 provides that an insurer who pays for a partial loss acquires no title to the subject matter insured, but is subrogated to all rights and remedies of the assured from the time of the casualty, in so far as the assured has been indemnified by the payment.⁴ Where the insurer pays for a total loss, it is also entitled to take over the interest of the assured in whatever may remain of the subject matter paid for.⁴

The court added that the only difference between the first two situations is timing, and that whether the insurer benefits from a third party payment does not depend on whether it arrives before or after the insurer has paid.¹

Subrogation, salvage and contribution compared

Three doctrines move money between the parties to a loss after a claim is paid. Subrogation looks outward, at a third party liable for the loss. Salvage, in the sense used here, concerns what remains of the insured property itself, and is different from the reward paid to those who save a ship or cargo at sea. Contribution operates between insurers covering the same risk, or between parties liable for the same damage.

For double insurance, the Supreme Court has referred to well-established principles under which two insurers of the same risk share liability equally up to their common limit.⁹ Contribution between wrongdoers is separate: under the 1978 Act any person liable for damage suffered by another may recover contribution from any other person liable for the same damage, and a person who settles in good faith can claim contribution whether or not they were in fact liable, provided they would have been liable if the facts alleged were proved.⁶

Time limits

Because the insurer enforces the policyholder's cause of action, the limitation clock is the policyholder's. In England and Wales, an action founded on tort cannot be brought after the expiration of six years from the date on which the cause of action accrued, and the same period applies to an action founded on simple contract.⁷¹⁰ The period runs from when the policyholder's cause of action accrued, not from when the insurer paid the claim, so part of it may already have passed before the insurer is involved. Contribution claims between parties liable for the same damage have their own period of two years.⁸

How a recovery is shared: the top down rule

When a recovery is less than the whole loss, someone has to be paid first: the insurer, or the policyholder for the part of the loss the policy did not cover. The House of Lords settled the order in Lord Napier and Ettrick v Hunter [1993] AC 713, a case concerning Lloyd's names, including members of the Outhwaite syndicate, who held stop loss insurance and later recovered damages from the syndicate's managing agents.¹¹

Lord Templeman treated each band of loss as if it were separately insured, with the name acting as his own insurer for the first £25,000 of loss and for any loss above £125,000.¹¹⁹ The highest layer is subrogated first, because its insurer agreed to pay only if the lower layers did not cover the whole loss; the next layer down is subrogated second, and so on.¹¹

The alternative the Court of Appeal rejected in Textainer is a proportionate split. The table below is an illustration only, not the law: it shares the same £130,000 in proportion to the loss each party bore before the recovery, the insurer 100/160 and the name 60/160.

Under the top down rule the insurers recover £95,000 and the name is left with the £25,000 excess.¹¹ The Supreme Court has since summarised the position: an insured who agrees to carry an excess must bear that amount before looking to the insurer and, as a self-insurer, ranks last in any recoveries made by way of subrogation from a third party.⁹ On the pro rata illustration the insurers would recover £13,750 less and the name £13,750 more.

The Court of Appeal applied the same rule to layered excess of loss cover in 2024. Textainer's losses from a container lessee's bankruptcy were agreed at US$101,856,624; its insurers, having insured US$40m of that loss, claimed 39.3% of a later settlement, while Textainer said it could keep recoveries until its uninsured losses were met.¹¹ The court held that the recoveries fell to be applied top down, and that the averaging rule for under-insurance in section 81 of the Marine Insurance Act 1906 is not engaged by layers of insurance.¹¹

Waivers of subrogation and co-insured parties

An insurer cannot use subrogation to sue someone insured under the same policy against the same loss. In the Ocean Victory case in 2017, Lord Sumption (who was in the minority on how the principle applied to that charter) described it as well established, and common ground, that where it is agreed that insurance shall inure to the benefit of both parties to a contract, they cannot claim against each other in respect of an insured loss, with co-insurance the paradigm case.¹² He said the better view, endorsed by the House of Lords, is that this rests on an implied term, because it would be absurd for an insurer to bring a subrogated claim against a co-insured whom it would be liable to indemnify against that same claim.¹²

In that case the demise charter, on the standard Barecon 89 form, contained provisions for joint insurance of the vessel. A majority of the Supreme Court, Lords Mance, Toulson and Hodge, agreed with the Court of Appeal that the charter's insurance provisions precluded the owners, and the hull insurers as their assignees, from recovering insured losses from the demise charterers; Lords Clarke and Sumption would have decided the point the other way. The point did not decide the appeal, because the court held that the port was not unsafe.¹²

An express waiver of subrogation is a policy or contract term by which recovery rights against named or described parties are given up. The standard demise charter form considered in that case contained an alternative clause stating that the owners and/or insurers would not have any rights of recovery or subrogation against the demise charterers in respect of insured losses; in that charter it had been deleted.¹²

A waiver reaches only as far as the cover. In The Rugby Football Union v Clark Smith Partnership (2022), the RFU claimed £4,440,909.45 for damaged high voltage cables and ductwork at Twickenham, of which its insurer RSA had indemnified £3,334,405.26.¹³ The ductwork installer, FM Conway, argued that it was co-insured under the RFU's all risks policy and relied on the policy's waiver of subrogation. Mr Justice Eyre held that Conway's cover was limited to what the construction contract required, so it was not co-insured for these losses, and that the waiver only extended to matters in respect of which Conway was insured under the policy.¹³

He described the co-insurance principle as operating as if a waiver of subrogation were implied into the policy, and concluded that the insured losses were not irrecoverable from Conway, so the ductwork designer, Clark Smith, could also seek contribution from Conway under the Civil Liability (Contribution) Act 1978.¹³

Knock-for-knock and other market arrangements

In UK motor insurance, the Competition and Markets Authority described subrogated claims in its 2014 market investigation. A non-fault insurer that has indemnified its policyholder recovers compensation for the losses caused by the at-fault party, in reality from that party's insurer; the claim is conducted in the names of the individual parties, but in practice by their insurers.¹⁴ The CMA noted that a subrogated claim is for compensation for the non-fault driver's losses, determined by tort law, and not reimbursement of the insurer's costs.¹⁴

In general use, knock-for-knock describes arrangements under which losses are left with each side's insurer instead of being recovered by subrogation. The CMA recorded credit hire companies' account that under the old knock-for-knock regime, when insurers paid directly for the services they provided to non-fault claimants, replacement vehicle provision was poor and often below claimants' legal entitlement.¹⁴ Credit hire companies said credit hire had improved the service, and the CMA heard no views to the contrary, though insurers said this level of service was now the norm.¹⁴ In EUI Ltd v Bristol Alliance (2012), a property insurer that had paid for damage to a shopping centre caused by a deliberately driven car could not recover from the motor insurer, and the Motor Insurers' Bureau agreement of 13 August 1999, then in force, precluded a claim made under a right of subrogation; Lord Justice Ward described this as what is in effect a knock-for-knock arrangement.¹⁵

Recoveries in UK motor claims data

The FCA's 2025 analysis of motor claims gives one published measure of recovery values. Across 11 firms, the average recovery by non-fault insurers from third parties on written-off vehicles rose from £2,780 in 2019 to £4,134 in 2023, an increase of 49%, while the number of first party vehicles written off by 12 firms rose from 272,042 to 296,135, up 9%.¹⁶

For repair claims, the FCA's average recovery from third parties reflects first party claims where the insurer has claimed the repair cost from third parties, and its recovery figures come from summary data from 9 to 11 firms depending on the metric.¹⁶ The data covers UK motor insurance in the FCA's sample of firms only.

Missed recoveries and claims leakage

A recovery that is not pursued, or is lost because the time limit expires, is one form of claims leakage. The steps above show where it can be lost: identifying a responsible third party when the claim is first notified (see first notification of loss), keeping the evidence, protecting the policyholder's limitation period, checking for waivers and co-insured parties, and agreeing with the policyholder how any uninsured loss will be pursued and shared.

Leading cases on subrogation