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Subrogation Claims by Insurers against Product Manufacturers and the Economic Loss Rule: Standing in the Shoes of the Insured

Product manufacturers often face the challenge of responding to tort claims brought by a plaintiff for personal injury damages, and by the plaintiff’s insurer for recovery of monies paid to the insured plaintiff by the product manufacturer. In essence, the insurer aims to step into the shoes of the plaintiff-insured by asserting claims in tort against the product manufacturer for damage to a finished product. However, an insurer acting as a subrogee merely succeeds to the legal rights or claims of a subrogor. See Trogub v. Robinson, 853 N.E.2d 59, 63 (Ill. App. Ct. 2006). “Subrogation simply means substitution of one person for another; that is one person is allowed to stand in the shoes of another and assert that person’s rights against the defendant.” Id. (internal quotations omitted). Subrogation rights originated in common law, but may also be created by statute or contract.
The insurer’s claim as subrogee is contingent on the subrogor having a cause of action against the product manufacturer. In other words, the subrogee can only recover damages when the subrogor has a legally cognizable cause of action against the product manufacturer. See Universal Underwriters Ins. v. A. Richard Racin, Inc., 916 A.2d 686, 692 (Pa. Super. Ct. 2007). Although subrogation is designed to afford relief to a third party, such as an insurer required to pay a legal obligation which ought to be met by a defendant, standing in the shoes of the insured has its limitations. Namely, while the subrogee “stands in the shoes” of the subrogor and is entitled to all of the rights of its subrogor, it is also subject to all of the limitations to which the subrogor would be subject. See, e.g., Allstate Ins. Co., v. Metro. Dade Co., 436 So. 2d 976, 978-79 (Fla. 3d DCA 1983) (affirming summary judgment in favor of the defendant because the statute of limitations had lapsed on the subrogor’s claim). Notably, the insurer’s contractual rights as subrogee do not create any independent right of recovery beyond that of the insured.
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