Subrogation Defense for Contractors: What to Do When an Insurance Carrier Sues You

Hendershot Cowart

A homeowner or property owner (your client or customer) files a claim with their homeowners or property insurance for damage. The insurance company then comes after you, alleging it was a construction or design defect that caused the damage resulting in a claim. This is known as a subrogation claim. The insurance company is seeking to recoup its claim losses by suing your construction or design business.

If you’ve been sued by an insurance carrier – or if an insurance carrier has intervened in an existing suit filed by the homeowner – alleging defective work, building code violations, failure to adhere to plans and specs, negligent supervision, etc., there are available defenses.

What Does Subrogation Mean in Insurance Settings?

Subrogation occurs when an insurance company “steps into the shoes of its insured” and sues a contractor, subcontractor (i.e., roofers, plumbers, electricians), architect, or design professional on behalf of its policyholder. Usually, insurance companies pay the policyholder for the damages in question and then seek reimbursement from the contractor.

Insurance companies gain subrogation rights when they pay their policyholders and believe other parties are at fault. This is known as conventional or contractual subrogation as insurance policies routinely include a provision granting subrogation rights to the insurer.

There are generally several elements to a valid subrogation claim:

  1. The insurance company paid the claim to the insured (usually the homeowner or property owner)
  2. The insurance company must not have “volunteered” to pay the insured
  3. The insurance company paid the claim to protect its own business interests
  4. The claim paid must be one for which the insurance company was not primarily liable
  5. Subrogation must not work any injustice to the rights of others

How Do You Fight Subrogation Claims?

Subrogation claims may be defended on a technical front – arguing that the claim does not meet the strict requirements of a valid subrogation claim.

Another available defense is the statute of limitations for legal actions based on negligence. In Texas, the statute of limitations is two years.

A skilled attorney can also attack the underlying claim of liability:

  • Was the property damage properly assessed?
  • Is another party liable?
  • What was the basis for calculating the dollar amount of the claim?

Some construction contracts include a subrogation waiver clause. A contract attorney with subrogation experience can review your contract to determine whether the waiver is enforceable. Additionally, some construction contracts limit the scope of subrogation claims, meaning you may only face liability for areas of the home or property you worked on.

As with other lawsuits, the burden of proof rests with the party who brings the lawsuit. Our lawyers can help you address the plaintiff’s claims one by one using every available defense.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

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