Legal Definitions - subrogee

A subrogee is a party who legally steps into the shoes of another party (called the "subrogor") to claim rights or remedies that the original party held. This typically occurs when the subrogee pays a debt or fulfills an obligation that was primarily owed by a third party, or when they cover a loss suffered by the subrogor. By doing so, the subrogee acquires the right to pursue the responsible third party for reimbursement, effectively taking over the original party's claim.

Here are some examples to illustrate this concept:

• Example 1: Property Tax Payment by a Lender

  Imagine a homeowner has an outstanding property tax bill. A bank, holding a mortgage on the homeowner's property, discovers this unpaid tax lien. To protect its own interest in the property (as unpaid property taxes can take precedence over a mortgage), the bank pays the overdue property taxes directly to the local government. In this scenario, the bank becomes the subrogee. It has paid a debt that was the homeowner's responsibility and now acquires the local government's right to collect that amount from the homeowner. The bank can then add this amount to the homeowner's mortgage balance or pursue it separately.

  How it illustrates: The bank (subrogee) paid a debt owed by the homeowner to the government (subrogor). By doing so, the bank steps into the government's position, gaining the right to recover the tax amount from the homeowner.

• Example 2: Surety Company and a Performance Bond

  A construction company is hired to build a new community center. As part of the contract, the construction company must obtain a performance bond from a surety company, which guarantees that the project will be completed according to the terms. If the construction company defaults and abandons the project, the surety company steps in and pays the community center owner the costs required to complete the project or rectify the damages. At this point, the surety company becomes the subrogee. It has fulfilled the construction company's obligation and paid the owner's loss. The surety company now has the right to pursue the defaulting construction company to recover the funds it paid out.

  How it illustrates: The surety company (subrogee) paid the community center owner (subrogor) for losses caused by the construction company's default. The surety then acquires the owner's original right to seek compensation from the defaulting construction company.