When an insurer pays a claim, doctrine prevents the insured from recovering twice and ensures responsibility falls on the party at fault.
- Subrogation: once the insurer has indemnified the insured, the insurer "stands in the shoes" of the insured and takes over the right to sue any third party who caused the loss. The insured must not prejudice subrogation (e.g., by signing a release after the loss).
- Contribution: where two or more policies cover the same loss, each contributes rateably (typically pro-rata by limits), so the insured collects 100% but not more. This applies to property policies with overlapping coverage; auto follows specific Insurance Act rules.
- Salvage: the insurer becomes entitled to the salvage value of any damaged property it has paid for in full, reducing the net loss.
- Abandonment: the insured cannot abandon damaged property to the insurer for a total-loss payout unless the policy expressly allows it (it generally does not, outside marine insurance).
Common mistake: a client signing a release of liability with the party that caused the loss after the insurer pays the claim. That release destroys the insurer's subrogation rights and breaches the policy conditions. The insurer can recover the payment from the insured.
🧠 Memory hook, "Steps Into Shoes": subrogation = the insurer steps into the insured's shoes to sue the wrongdoer.
Recall: What does subrogation prevent the insured from doing after a loss? In a contribution scenario, can the insured collect more than 100% of the loss?