Court of Appeal Puts the “Equity” in Equitable Subrogation

Lady law blindfolded holding scales of justice

The 4th District Court of Appeal examined a trial court decision finding against an insurer’s equitable contribution claim against several subcontractors in a construction defect lawsuit.

October 5, 2020
Garret Murai - California Construction Law Blog

Subrogation as a concept is well understood in insurance circles. According to the Institute of Risk Management Institute’s glossary of insurance terms subrogation is “the assignment to an insurer by the terms of [a] policy or by law, after payment of a loss, of the rights fo the insured to recover the amount of the loss from one legally liable for it.” In other words, if an insurer comes out of pocket for something someone else broke, the insurer can turn to that responsible party for reimbursement of its out of pocket costs.

Typically, subrogation is, as stated in IRMI’s glossary of insurance terms, a matter of contract and the rights and responsibilities of parties are set forth within the terms of a policy. However, subrogation may, as stated in IRMI’s glossary, also be matter of law. And this is where equitable subrogation comes in.

“Equitable subrogation,” according to IRMI, is “the right of subrogation granted under common law when one party has made a payment on behalf of another and becomes entitled to whatever recovery rights the other party has against a responsible third party.”

Mr. Murai may be contacted at gmurai@nomosllp.com



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