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Subrogation glossary

The vocabulary of recovery, defined in one sentence each, then explained. 43 terms and growing.

Fundamentals

Cause of Loss: Cause of loss is the event or condition that produced a claim, and establishing it is what identifies who may be liable in subrogation.
Claims Leakage: Claims leakage is the money an insurer loses to preventable inefficiency, including recoverable dollars that are never pursued because no one identified the opportunity.
First-Party vs. Third-Party Claim: A first-party claim is one a policyholder files with their own insurer; a third-party claim is filed against someone else's insurer for a loss they caused.
Liability: Liability is legal responsibility for a loss, establishing who was at fault, and to what degree, is the foundation of any subrogation claim.
Subrogation: Subrogation is an insurer's right to recover the money it paid on a claim from the party who actually caused the loss.
Third-Party Liability: Third-party liability is the legal responsibility of someone other than the insurer or its policyholder for a loss, the basis on which any subrogation claim is pursued.
Tortfeasor: A tortfeasor is the party who committed the wrongful act that caused a loss, the at-fault party a subrogation claim pursues.

AI & Automation

AI Subrogation: AI subrogation is the use of artificial intelligence to read claim files, identify recovery opportunities, weigh liability, and draft demands, so recovery no longer depends on manual file review.
Grounding (AI): Grounding is the practice of requiring every AI-generated statement to cite, and be verifiable against, a specific source in the underlying documents.

Process & Workflow

Actual Cash Value (ACV): Actual cash value is what damaged property was worth at the time of loss, replacement cost minus depreciation, and it sets the baseline for what an insurer paid and can recover.
Betterment: Betterment is a reduction in a claim payment (or recovery) reflecting that a repair left the property in better condition than before the loss, for example, new parts replacing worn ones.
Deductible Recovery: Deductible recovery is the return of a policyholder's deductible out of a successful subrogation recovery against the at-fault party.
Demand Package: A demand package is the document set an insurer sends the at-fault party requesting reimbursement, the demand letter plus the evidence and itemized damages that support it.
First Notice of Loss (FNOL): First notice of loss is the initial report of a claim to the insurer, and it is the earliest point at which a subrogation opportunity can be spotted.
Loss Run: A loss run is a report listing an insured's claims history, the paid and reserved losses that recovery teams mine for subrogation opportunities.
Net Recovery: Net recovery is the amount an insurer keeps from a subrogation claim after deducting the costs of obtaining it, such as fees and allocated expenses.
Recovery Rate: Recovery rate is the share of recoverable dollars an insurer actually collects, a core measure of subrogation performance.
Reservation of Rights: A reservation of rights is an insurer's notice that it is handling a claim while reserving the right to later deny coverage or pursue related rights, including recovery.
Salvage: Salvage is the residual value an insurer recovers by taking ownership of and reselling damaged property it has paid a total-loss claim on.
Subrogation Recovery: Subrogation recovery is the end-to-end process of identifying, pursuing, and collecting reimbursement from an at-fault third party after a claim is paid.
Third-Party Administrator (TPA): A third-party administrator is a firm that handles claims (including subrogation) on behalf of insurers or self-insured organizations that outsource the work.
Total Loss: A total loss is a claim where the cost to repair the damaged property meets or exceeds its value, so the insurer pays it out in full and often recovers value through salvage.

Legal & Jurisdiction

Anti-Subrogation Rule: The anti-subrogation rule bars an insurer from pursuing subrogation against its own insured, you cannot subrogate against the very party you insure.
Collateral Source Rule: The collateral source rule bars reducing a plaintiff's damages by benefits they received from other sources, such as their own insurance, which is part of why subrogation exists.
Common Fund Doctrine: The common fund doctrine requires an insurer to share in the legal costs of a recovery it benefits from, reducing its subrogation reimbursement by a proportionate share of attorney's fees.
Comparative Negligence: Comparative negligence is a rule that reduces a recovery by the share of fault attributable to the party seeking it.
Contribution: Contribution is the sharing of a loss among multiple insurers or responsible parties, each paying its proportionate share, distinct from subrogation's recovery from an at-fault third party.
ERISA Subrogation: ERISA subrogation is a self-funded health plan's federally governed right to recover medical benefits it paid from a member's third-party injury settlement.
Gross Negligence: Gross negligence is a severe departure from ordinary care, a higher degree of fault than simple negligence that can carry greater legal consequences.
Indemnity: Indemnity is the principle that insurance restores the insured to their pre-loss position (no better, no worse) and it is the foundation subrogation rests on.
Inter-Company Arbitration: Inter-company arbitration is the industry forum where insurers resolve subrogation disputes between each other, instead of going to court.
Joint and Several Liability: Joint and several liability lets a claimant recover the full amount of a loss from any one of several at-fault parties, leaving those parties to sort out their shares.
Made-Whole Doctrine: The made-whole doctrine holds that a policyholder must be fully compensated for their loss before the insurer can collect on its subrogation claim from a limited recovery.
Negligence: Negligence is the failure to exercise reasonable care, and it is the fault standard most subrogation recoveries are built on.
Proximate Cause: Proximate cause is the legally recognized primary cause of a loss, the event close enough in the chain of causation to establish liability.
Right of Reimbursement: A right of reimbursement is a contractual claim to be repaid out of a recovery, distinct from subrogation's independent right to pursue the at-fault party directly.
Spoliation: Spoliation is the loss or destruction of evidence relevant to a claim, which can bar a recovery or trigger sanctions against the party responsible.
Statute of Limitations: A statute of limitations is the legal deadline for bringing a subrogation claim; miss it and the right to recover is lost.
Vicarious Liability: Vicarious liability holds one party responsible for another's wrongful act, most commonly an employer for the acts of an employee acting within the scope of work.
Waiver of Subrogation: A waiver of subrogation is a contract clause in which one party gives up its insurer's right to pursue recovery against another party.

Lines of Business

Product Liability Subrogation: Product liability subrogation pursues recovery from a manufacturer or seller when a defective product caused the insured loss, a fire from faulty wiring, say.
Uninsured / Underinsured Motorist (UM/UIM): UM/UIM coverage pays an insured's losses when the at-fault driver has no insurance or too little, coverage that interacts closely with subrogation rights.
Workers' Compensation Lien: A workers' compensation lien is the employer or carrier's right to be reimbursed, out of an injured worker's third-party recovery, for the benefits it paid.