Sumit gifted a brand new car to his wife Devi on her birthday. The car was insured against damage or loss with Wheels Insurance Company for an amount of ₹ 5 lakh with a deductible of ₹ 75,000 from her coverage. One day,

The Insurance Company paid the claim amount to Devi and later filed a suit for claiming the same from Amit Garg by following the process of subrogation. In common parlance, subrogation is the process of legally substituting a person in place of another. According to the principle of subrogation, when the insured is compensated for the losses due to damage to his insured property, then the ownership right of such property shifts to the insurer. This principle is applicable only when the damaged property has any value after the event causing the damage. The insurer can benefit out of subrogation rights only to the extent of the amount he has paid to the insured as compensation. In subrogation, legal proceedings are initiated by the insurance company against a third party that has a liability to the policyholder. Subrogation gives the insurance company, the right to collect the claim amount from a third party after paying the insured's claim. It is one of the most effective procedures of post-loss claims handling. Subrogation is common in claims that pertain to automobile damage, property insurance and worker's compensation claims. Although the Policyholder's deductible may be included in the claim, other losses suffered by the policyholder such as medical expenses, which are not included in the coverage are not taken into account during subrogation.