Subrogation, a right of recovery conferred by equity, contract or statute, stands alongside contribution and indemnity as one of the three most important doctrines of risk transfer. The doctrine of subrogation is centuries old and is said to have roots that date back to the Roman laws of the 13th century or possibly much earlier.

Most insurance policies contain a subrogation clause that confers a right of subrogation on the insurer. Waivers of subrogation rights may be an important aspect of insurance settlement negotiations. Nevertheless, subrogation is an often overlooked doctrine that rarely makes it into the spotlight. In the last few years, however, insurance disputes concerning subrogation rights related to claims under the Comprehensive Environmental Response Compensation Liability Act (CERCLA) have yielded several interesting decisions. As a result, a primer on subrogation and a discussion of those CERCLA cases is timely and worthwhile.

Subrogation 101

Subrogation is a right “that enables one who is secondarily liable for a debt and who pays it to succeed to the rights, if any, that the creditors hold against the debtor.”1 The subrogee, the person who pays the debt, stands in the shoes of the subrogor, the person who received the payment, to seek recovery from the person who has primary legal responsibility for the loss.

Historically, the classic example of subrogation involved the surety relationship. Under Roman law, a surety who paid a sum to a creditor on behalf of a debtor did not acquire the creditor's rights of recovery unless there was an express agreement prior to the payment. This evolved under English common law, which provided the surety with an automatic right of recovery against the debtor and paved the way for modern day subrogation claims.2