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Insurance Basics—“Subrogation”

By Bob Mackey, representative for the EAA Aircraft Insurance Plan, Administered by Falcon Insurance Agency

January 14, 2010

Sub-ro-gate (ww.dictionary.com)

  1. to put into the place of another; substitute for another.
  2. Civil Law. Ro substitute (one person) for another with reference to a claim or right.

Subrogation (airplane insurance policy)
In the event of any payment under this policy the Company shall be subrogated to all of the Insured’s rights of recovery therefore against any person or organization and the Insured shall execute and deliver instruments and papers and do whatever else is necessary to enforce such rights. The Insured shall do nothing after loss to prejudice such rights.

Have you ever been in a car accident when you were not at fault? Do you know what happens after your insurance company(s) make any payments for your injuries, injuries to others, property damage, or damage to your car? Well the definitions shown above should give you a little clue. Insurance companies will definitely endeavor to recover any monies they pay on your behalf as a result of the insurance policy they have issued to you.

When you buy an insurance policy you are entering into a contract, a contract between you and the insurance company. You are agreeing to pay some money to the insurance company and they are agreeing to defend and indemnify you for injuries or damages that may arise out of a covered loss during the term of the insurance policy. That is, provided all conditions are met and there are no exclusions that would prohibit payment as insurance coverage.

This contract also transfers to the insurance company your rights to recover any payments it may make from the person, persons, or organization that may be responsible for the loss. Let’s say you buy a shovel and the shovel handle breaks when you use it. You are injured (broken arm) so your medical insurance company pays for the medical expenses, but also asks you for the shovel. After the medical insurance company has paid all of your medical expenses it contacts the company that manufactured the shovel in an attempt to have the shovel manufacturer’s products insurance company reimburse the medical insurance company for what it paid in medical expenses.

Then the insurance company for the shovel manufacturer contacts the company that made the handles for the shovel manufacturer and in turn ends up talking with the products insurance company for the handle manufacturer. The insurance company for the handle manufacturer settles the claim with the shovel manufacturer’s insurance company…and this could go on and on depending on the situation. The bottom-line is insurance companies will exercise their right to subrogate against a third party if there is evidence that a fault lies elsewhere.

So what about aviation-related claims? Suppose you are flying your airplane and as you touch down, the axle on the right main gear breaks and you run off the runway. In the process you damage your airplane, you hit several runway lights, your passenger is slightly injured (sore shoulder), and you hit a parked airplane. In this situation your insurance company will probably settle the property damage and injury claims and have your airplane repaired as quickly as possible. Your insurance company is going to pay special attention to the broken axle which, if it turns out to be faulty, will prompt subrogation action.

Let’s say the axle was just replaced by the local mechanic at the airport, who obtained the replacement from a parts supply company. Your insurance company will probably have the axle examined by a lab and if it turns out the axle was made incorrectly, or maybe with bad materials, or maybe wasn’t the correct axle for your airplane, there’s a very good chance your insurance company will subrogate.

On the other hand, if there is no evidence that the axle was incorrectly manufactured and it was installed correctly, the insurance company will not pursue recovery. I’ve seen it both ways.

So that’s “subrogate” or “subrogation”…a legal measure an insurance company applies when attempting to recover the monies they pay on behalf of the Insured as a part of the insurance policy requirements.

Happy and Safe Flying!

If you would like to know more and the EAA Aircraft Insurance Plan, or if you would like to know more about finding the right insurance for the type of flying you do, call 866-647-4EAA (4322), or visit www.eaainsurance.org and complete the online quote request form. When you insure your airplane through the EAA Aircraft Insurance Plan you’re helping support EAA Member Safety Programs and EAA Youth Education Programs.

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