CA Subrogation & Recovery Procedures Flashcards

Subrogation in insurance allows the insurer to:

Answer: Step into the insured's shoes to recover losses from a negligent third party

Subrogation is the legal right of the insurer to pursue a third party that caused an insurance loss to the insured, after paying the insured's claim.

Under California law, the insured must be made whole before the insurer can exercise subrogation rights. This is known as the:

Answer: Made whole doctrine

California's made whole doctrine requires that the insured fully recover all their losses before the insurer can collect any subrogation recovery from the third-party proceeds.

What is a 'waiver of subrogation' clause in an insurance policy?

Answer: A clause where the insurer agrees not to pursue recovery against a specified third party

A waiver of subrogation prevents the insurer from recovering losses from a named party, often required in construction contracts to protect general contractors.

California's statute of limitations for a subrogation lawsuit based on property damage is generally:

Answer: 3 years

Under California Code of Civil Procedure § 338, the statute of limitations for property damage claims, including subrogation, is three years from the date of loss.

Which of the following actions by the insured can impair the insurer's subrogation rights?

Answer: Signing a release with the responsible third party before the insurer is reimbursed

If the insured settles with and releases the at-fault party before the insurer recovers its subrogation interest, it can extinguish the insurer's recovery rights.

What is the primary purpose of a 'lien letter' sent by an insurer to a third-party tort defendant?

Answer: To assert the insurer's subrogation interest and notify the defendant of the claim

A lien letter formally notifies the responsible party (or their insurer) that the paying insurer has a subrogation interest and intends to seek reimbursement.