What conditions can subrogation arise in insurance?

Answer 1

In insurance, when there is more than one party involved or at fault in an insured loss, there is a mechanism known as Primary insured versus other insureds that follow. Subrogation arises when the Primary insurance is being tapped into when in fact most or all fault lies with in part or in whole to a different insured.

For example, risks of bodily injury or property damage are insured by a businessowner who installs HVAC equipment. His end user is his customer, therefore he is usually considered the Primary on claims submitted by his customers. If liability occurs under a covered cause of loss, such as bodily injury to a third party/customer, the Primary insurance will pay. However, if the loss was actually caused by a faulty design of an A/C unit, then the Primary insurance will subrogate to recover most or all of its incurred losses from the designer of the A/C unit or as is mostly commonly the case, his insurance company.