Subrogation is a well-established legal principle that allows insurers to recover some or all of their losses from a third party deemed liable for the event that triggered a claim. In simple terms, it enables an insurer to pursue reimbursement from the party responsible for causing the loss, rather than absorbing the financial impact themselves.

“Subrogation allows the insurer to step into the shoes of their policyholder and recover a payment made under the policy (the outlay) from a third party,” said Daniel Scognamiglio, Partner at Blake Morgan. The claim is brought in the name of the policyholder and is one of several mechanisms available to insurers to recover costs.

This recovery process becomes particularly relevant in international scenarios, where swift intervention is often required. Gitte Bach, CEO of New Frontier Group, explained: “When someone has an accident abroad, the insurer often steps in immediately to pay for the care so that treatment isn’t delayed – but that doesn’t mean they should absorb the cost permanently if a third party is liable.”

Subrogation not only helps insurers mitigate financial losses but also promotes fairness and accountability. “Designed to stop the policyholder from making a double recovery from their own insurance and a third party for the same loss, being able to recover even a small percentage of this outlay has a huge impact on an insurer’s loss ratio,” said Scognamiglio. Arguably, “subrogation also improves access to justice and the benefit that policyholders receive,” he added. “By including an outlay as a subrogated claim, an individual may not be able to afford to bring their own claim but may benefit from an insurer meeting the cost of that claim in the hope of making an outlay recovery.”

Subrogation allows the insurer to step into the shoes of their policyholder and recover a payment made under the policy from a third party

Fairness is also a key driver behind subrogation for providers like New Frontier Group. “Subrogation is vitally important because it isn’t just about getting the money back; it’s about ensuring fairness,” said Bach. “When another party is responsible, our clients shouldn’t bear that burden, and neither should their insureds.”

Bach further emphasised the value of embedding subrogation into the case management process from the outset: “If we suspect third party liability – like in auto accidents or injuries in public places – we ensure our team gathers documentation and communicates with insurers early,” she said. “Subrogation becomes especially powerful when embedded into the case management process from day one.”

Faz Subhani, Vice President of Global Sales and Marketing at Penfield Medical Cost Containment, reinforced the foundational role that subrogation plays, particularly in travel insurance and international private medical insurance (IPMI). “Subrogation serves as a fundamental mechanism underpinning the insurance market. In travel insurance and IPMI, it seeks to ensure that the financial burden of medical treatment falls upon the party legally responsible for causing the injury,” he said.

Subhani highlighted three key goals of subrogation. The first is maintaining premium affordability by recovering costs from liable third parties. The second is ensuring that negligent parties bear the financial consequences of their actions. The third is preserving the deterrent effect of liability, thereby promoting safer behaviour.

Guiding principles for liability in the subrogation process

Effective subrogation depends on identifying liable parties early and gathering sufficient evidence to support a claim. Scognamiglio emphasised the importance of ensuring that a claim has merit before pursuing recovery. “Making sure that they have assets or insurance to cover that claim” is crucial, he explained. “It is usually pointless bringing a claim against a third party who has no money. An early investigation of liability and the potential third party is helpful, especially where there is a high-cost claim. This should be soon after the incident and before evidence or witnesses disappear.”

Subhani outlined five key questions that should guide the subrogation process. First, it must be determined whether another party caused the injuries that led to the insurer’s losses. Once causation is established, the next consideration is whether there is sufficient evidence to support that claim. Timing is also crucial: has the limitation period for filing a claim expired? Even if liability is clear and the claim is timely, it is important to assess whether the responsible party is solvent or holds liability insurance coverage. Finally, the potential recovery must justify the effort and expense involved, so it is essential to evaluate whether the losses are significant enough to make pursuing a subrogated claim cost-effective.

Bach stressed the importance of prompt action and thorough documentation: “Clearly establishing liability early – through incident reports, police involvement, and witness statements – is essential. Without these, claims become much harder to pursue.” She also underscored the value of educating patients and families about the insurer’s right to act on their behalf, a right often embedded in the policy but not always well understood. “Acting quickly is crucial to avoid missing legal deadlines,” she added.

Ian Brown, Partner at Trowers & Hamlins, outlined key legal principles behind subrogation. He emphasised the insurer’s right to recover only what it has paid, without profit, and its ability to assume the insured’s claims against third parties – but no more. Causation is critical, requiring a clear link between the third party’s actions and the loss. The insurer bears the burden of proof and must meet the legal standard for liability. Brown also noted that if the insured is partly at fault, any recovery may be reduced accordingly.

In travel insurance and IPMI, subrogation seeks to ensure that the financial burden of medical treatment falls upon the party legally responsible for causing the injury

Finally, Brown noted that a frequently overlooked consideration is whether the defendant has insurance: “The existence and extent of the defendant’s insurance coverage significantly impacts the viability of any recovery action,” he said. “Without adequate insurance coverage, even a successful liability claim may prove worthless in practical terms.”

Current cost recovery principles and processes

According to Scognamiglio, under English law, an insurer may exercise rights of subrogation when certain conditions are met: the insurer has made a payment, the insurance in question is one of indemnity (such as travel insurance) and the policy wording does not exclude subrogation. As a result, the insurer possesses two distinct rights. First, the policyholder is required to bring a claim in their own name against a third party. Second, if the policyholder receives any compensation from that third party for the insured loss, they must pay that amount to the insurer.

Ex-gratia (goodwill) payments made “under the policy with the intention of reducing the policyholder’s loss” can be included in a subrogated claim, said Scognamiglio. Reinsurers are also entitled to benefit from subrogation.

Scognamiglio explained that the correct party to bring a claim depends on the jurisdiction: “In England, it must be in the policyholder’s name, whereas in Spain it must be brought in the insurer’s name.” When a claim is brought in the policyholder’s name, the insurer holds “a lien over the money received from a third party”, limited to “the amount of the outlay plus interest”.

Where the policyholder has breached an express or implied term of the contract, the insurer will have a claim for breach of contract as against that policyholder.

In summary: “The laws, regulations, jurisprudence and practice concerning subrogation will vary from jurisdiction to jurisdiction and will be based primarily in the law of negligence/personal injury, insurance law, and insurance industry practice with regard to subrogation in that jurisdiction,” said Subhani.

Third-party cost recovery across the globe

“It is important to note that this isn’t only a country-by-country issue,” said a spokesperson for Global Excel. “Within countries, issues of subrogation are often not governed by federal law, but by state/provincial law. This means, in a country like the US, there are some states where it is much more difficult for an insurer to subrogate than in others, because of either restrictions on subrogation or low minimum policy limits for at-fault policies of insurance.”

A lot of jurisdictions do not allow subrogation, and therefore local advice or experience of those jurisdictions is required, said Scognamiglio. He went on to explain: “On occasion, a jurisdiction may accept that English law applies to an English contract of insurance.” Therefore: “With exception, this tends to be jurisdictions whose law is derived from English law. Whilst strictly speaking this is not subrogation, some jurisdictions allow an outlay to be recovered where the claim is brought by the insurers in their own name.”

Bach agreed that every country has its own legal culture around liability, emphasising that some are far more challenging than others. For instance, she explained, “in parts of Latin America or Southeast Asia, even when liability is clear, enforcement can be weak, or the legal process can be extremely drawn out”. Furthermore, she pointed out, “there are also countries where compulsory liability insurance isn’t common, which means there might not be any money to recover – even if we have a rock-solid case”.

She added: “That’s where local partnerships become essential. We often rely on regional legal teams or assistance companies who understand the nuances and can help us navigate the system effectively.” Moreover, she stressed that even when recovery isn’t possible, having that local insight allows them to set realistic expectations and still manage the case with the same level of service.

According to Brown, “some civil law jurisdictions, especially those strictly following Islamic law (sharia), may not recognise subrogation as in common law systems. Certain Middle Eastern and African countries fall into this category.” He added, “Countries with complex court procedures, limited discovery, or local representation requirements can hinder recovery. Even with judgments, enforcement is often difficult in less developed legal systems, with limited assets or restrictive foreign judgment rules.”

Cost recovery mechanisms post-Brexit

For UK insurers, Brexit has added a significant layer of complexity and cost to the process of recovering outlays in cross-border insurance claims. As Scognamiglio explained, most claims that could previously be brought in the UK before Brexit now must be pursued in a European Union (EU) jurisdiction. “Most claims that could be brought in the various jurisdictions of the UK prior to Brexit cannot now be brought here,” he said. This shift is largely due to the UK no longer being part of the European regime and the absence of any bilateral treaty to fill that gap. As a result, injured claimants are often required to bring their claims in the relevant EU country, where, as he pointed out, “the costs of making a recovery in the EU are rarely recoverable in addition to damages.”

If subrogation is even a remote possibility, we pursue it as if it’s guaranteed because that preparation can mean the difference between millions recovered or lost

This change means insurers must weigh the value of any potential recovery carefully. “The outlay to be recovered or another claim (such as a policyholder’s injury claim) needs to be valuable to make the recovery economically worthwhile and proportionate,” Scognamiglio noted. However, he highlighted that there are still exceptions that allow a claim to be brought in England or Wales, such as when the defendant is based in the UK, the injury is substantial, or it occurred during a regulated package holiday. He also warned of complications in EU insurance policies, many of which contain clauses that prevent payment of claims brought outside their home jurisdiction. “Whilst probably contrary to EU law, such a clause is likely to be enforceable where a claim is brought in the UK against that foreign insurer,” he said.

This evolving legal and regulatory environment underscores the importance of expert guidance and local knowledge when pursuing cross-border subrogated claims.

The impact of Brexit on cross-border recovery extends beyond jurisdictional shifts, dismantling the legal framework that once made such claims more efficient. “The UK is no longer party to various EU regulations that facilitated cross-border litigation and enforcement, including simplified procedures for service of documents and enforcement of judgements,” explained Brown. As a result, determining the appropriate jurisdiction for claims has become more complex, with UK courts no longer bound by EU jurisdictional rules.

Without harmonised procedures, insurers must now navigate a range of legal systems, each with its own rules. “The need to navigate different legal systems without the benefit of harmonised EU procedures has increased both the cost and duration of cross-border recovery actions,” Brown said. In some cases, EU member states have added new requirements for UK-based claimants, creating additional barriers to recovery.

Subrogation in countries with high-cost medical bills

Subrogation takes on added complexity in regions where medical care comes at a premium. While the underlying principles remain consistent, the legal and practical challenges vary significantly across jurisdictions.

Global Excel’s spokesperson explained: “The basic principles of subrogation don’t change based on the costs of the claim; however, each region has its own subrogation laws, and this will impact the chances and legal approach to subrogation.” Adding to the complexity is the ‘Made Whole’ rule, which dictates that the insured must be fully compensated before an insurer can pursue recovery; a rule applied differently across legal systems.

In countries where medical expenses are particularly high, such as the US, Dubai, and Hong Kong, subrogation challenges stem not just from the size of the claim, but from jurisdictional nuances around how and where a recovery can be pursued. “Broadly speaking, the same issues arise wherever in the world we attempt to make the recovery,” said Scognamiglio. “Medical costs can be very high where a policyholder is treated in the US, Dubai or Hong Kong, but that is not always the best jurisdiction to bring a claim.”

To navigate these complexities, insurers often seek more favourable legal environments for initiating recovery. “Very often we will look to bring a claim in a different, more favourable jurisdiction such as England or one of the states of the US, despite the medical costs being high because of the place of treatment,” Scognamiglio added. This strategic positioning reflects a broader need to weigh legal frameworks and enforcement feasibility alongside medical expenses.

Bach agreed that in high-cost jurisdictions, the stakes are high – and so is the urgency. “In high-cost regions, subrogation can make a big financial difference, so we handle those cases with special urgency,” she said. She recounted a striking case involving a young Swedish expat who fell from a 10-storey building in the US, incurring over US$6 million in medical bills. While emergency care took precedence, Bach’s team quickly assessed potential third-party liability. “It turned out the fall happened on a rental property where safety features were in question. We flagged the case early, documented every detail, and helped the insurer prepare for a potential recovery process.” The legal proceedings were slow, but the early groundwork significantly strengthened the insurer’s subrogation position.

“In places like the US, where medical bills can skyrocket in a matter of hours, the margin for error is small,” Bach noted. “If subrogation is even a remote possibility, we pursue it as if it’s guaranteed because that preparation can mean the difference between millions recovered or lost.” In other regions, such as Dubai and Hong Kong, she stressed the importance of close coordination with hospital billing departments and legal contacts. “Each region requires its own playbook,” she said, highlighting the need for locally adapted strategies.

Brown echoed these views, emphasising that jurisdictions with high medical costs demand tailored subrogation approaches. In the US, for example, the intricacies of healthcare billing require expert navigation. “Subrogation professionals must understand Medicare and Medicaid liens, hospital liens, and the interplay between various insurance coverages,” he said. The country’s litigious nature and common use of contingency fees can create both hurdles and opportunities. Additionally, the ‘Made Whole’ doctrine – in effect in some states – can prevent insurers from recovering if the injured party hasn’t received full compensation. “Where policy limits are low, the combination of these factors can make recovery impossible,” Brown added.

The need to navigate different legal systems without the benefit of harmonised EU procedures has increased both the cost and duration of cross-border recovery actions

In the United Arab Emirates (UAE), civil law is influenced by Islamic legal principles, making the legal process uniquely structured. While the international nature of Dubai’s workforce can create openings for subrogation, cultural sensitivities and strict procedural requirements must be handled with care.

Hong Kong, meanwhile, may present a more familiar legal environment for insurers due to its common law foundation. “As a common law jurisdiction, Hong Kong generally provides a favourable environment for subrogation,” said Brown. However, the high cost of care and international scope of many cases, along with significant legal expense, continue to pose challenges.

Conclusion

Subrogation is not just a technical legal concept – it’s a vital tool for maintaining insurer solvency, ensuring fairness, and holding third parties accountable. As international insurance becomes more complex, the need for timely, well-informed, and strategic subrogation efforts will only grow. Whether navigating new post-Brexit realities or addressing rising global healthcare costs, subrogation remains a cornerstone of responsible claims management.