The Equitable Remedy of Subrogation

A Video Explaining how to Obtain a Subrogation RecoveryShow more

Equity allows creative remedies for wrongs that do not fit within the confines of traditional tort or contract remedies (i.e., with cash). The ancient maxim “for every wrong there is a remedy” (California Civil Code § 3523) applies to subrogation rights. The maxims were adopted from the common law of England and are relied on in all jurisdictions. In California, the maxims were codified in its Civil Code.

The purpose of equitable subrogation is “to prevent forfeiture and unjust enrichment.” [Eastern Savings Bank, FSB v. Pappas, 829 A.2d 953, 957 (D.C.2003)]

The roots of equitable subrogation lie in the concept of remedying a mistake. In Hicks v. Londre, 125 P.3d 452, 458 (Colo.2005) the Colorado Supreme Court observed that equitable subrogation is appropriate when mistake is involved. [Joondeph v. Hicks, 235 P.3d 303 (Colo., 2010)]

Equitable subrogation is a doctrine that allows one who has discharged the debt of another to succeed to the rights of the satisfied creditor. For example, if Creditor # 3 pays off a debt owed to Creditor # 1 by the same debtor, equitable subrogation would enable Creditor # 3 to jump ahead of Creditor # 2 in priority for repayment. The doctrine, which began in the English courts of equity as a way for a surety to seek repayment from a defaulting debtor, has been applied by the Delaware Court of Chancery for over a century. [Eastern Savings Bank, FSB v. Cach, LLC, Supreme Court of Delaware, 124 A.3d 585 (2015)]

ZALMA OPINION

Subrogation is an equitable remedy and with the assistance of a professional claims person becomes a profit center to an insurer since it can reduce or fully reimburse the insurer for monies paid to an insured. Every claims investigation must include an investigation of subrogation potential.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at https://www.rumble.com/zalma ; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4