Subrogation
Subrogation is the legal process by which an insurance carrier pays the policyholder's claim and then pursues recovery from the third party responsible for causing the damage - such as a neighbor's insurer after their tree falls on the policyholder's roof.
When the Carrier Recovers Money from Someone Else
Subrogation is the legal process by which the insurance carrier pays the policyholder's claim and then pursues recovery from the third party responsible for causing the damage. The classic example: a neighbor's tree falls on your homeowner's roof. The homeowner's insurer pays the claim, repairs the roof, and then goes after the neighbor's insurer for reimbursement. The homeowner gets repaired. The insurers sort out who ultimately pays.
How Subrogation Works in Practice
The policyholder files the claim with their own carrier, not the third party's. The carrier handles the claim normally - inspection, scope of loss, payment - and then pursues the responsible party separately. The homeowner does not need to sue the neighbor or negotiate with the neighbor's insurer directly.
| Step | What Happens | Who Is Involved |
|---|---|---|
| 1 | Policyholder files claim with their own carrier | Homeowner + their carrier |
| 2 | Carrier processes claim, pays policyholder | Carrier + homeowner |
| 3 | Carrier pursues third party's insurer | Carrier vs. third party's carrier |
| 4 | If successful, carrier recovers some or all costs | Carriers only |
| 5 | Deductible may be refunded to policyholder | Carrier + homeowner |
Why Contractors Should Care About Subrogation
Subrogation does not directly affect what you get paid, but it can slow everything down. When a carrier is pursuing subrogation, they may hold the claim file open longer than normal. This delays final settlement, delays recoverable depreciation release, and extends the timeline on a job you may have already completed. If your payment depends on depreciation release, a subrogation hold can mean waiting months for money the carrier already owes.
Ask the adjuster early in the process whether subrogation is being pursued. If it is, plan your cash flow accordingly and keep the homeowner informed about potential delays.
Common Subrogation Scenarios in Restoration
Beyond the neighbor's tree, subrogation comes up in several common restoration scenarios: a plumber's faulty work causes water damage, a roofer's poor installation leads to leaks, or a fire starts due to a defective appliance. In each case, the homeowner's carrier pays the claim and then pursues the responsible party - the plumber, the roofer, or the appliance manufacturer.
If you are the contractor on a subrogation claim, document everything meticulously. Your invoices, photos, and Xactimate estimate may become evidence in the carrier's recovery action. Clean documentation strengthens the carrier's subrogation case, which can speed up the recovery and get the homeowner's deductible refunded faster.
Frequently asked questions
Subrogation does not directly affect the contractor's payment, but it can delay claim processing. If the carrier is pursuing subrogation, they may hold the file open longer, which delays final settlement and depreciation release.
If a neighbor's tree falls on your homeowner's roof, the homeowner's insurer pays the claim and then pursues the neighbor's insurer for reimbursement. The homeowner gets repaired, and the insurers sort out who ultimately pays.
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