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The Equitable Right of Subrogation
Subrogation is an equitable right to seek recovery of losses paid by the plaintiff for another in an action against the party that caused the losses. In insurance law, subrogation refers to the right of the insurer to seek compensation for its payments to its insured by filing an action against the person that caused the damages to the insured.
A captive insurer is captive in the sense that it is owned and operated by the insured. There is a point at which it makes economic sense for a company to establish and operate its own insurer as part of the company's risk management program rather than pay premiums to independent insurers.
The Liability Risk Retention Act of 1986 provides for the formation of purchasing groups to buy insurance. Such groups must be made up of members or companies with similar risk exposure due to their involvement in similar businesses. The groups must meet the regulatory requirements of the states in which they are organized, but, due to preemption by the Act, some regulatory requirements of other states in which the groups do business do not have to be met.
If an insured suffers a loss for which an insurer denies coverage, the insured may attempt to recover damages from the agent or the insurer on the ground that he would not have purchased such a policy had the agent explained it to him. The action may be brought under a negligence theory. In such a case, the insured would need to prove that the agent had a duty of care to explain the policy to him.
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