Assuming the legal rights of a person for whom expenses or a debt has been paid. typically, subrogation occurs when an insurance company which pays its insured client for injuries and losses then sues the party which the injured person contends caused the damages to him/her. example: fred farmer negligently builds a bonfire which gets out of control and starts a grass fire which spreads to ned neighbor’s barn. good hands insurance co. has insured the barn, pays neighbor his estimated cost of reconstruction of the barn, and then sues farmer for that amount. farmer will have all the “defenses” to the insurance company’s suit that he would have had against neighbor, including the contention that the cost of repairing the barn was less than neighbor was paid or that neighbor negligently got in the way of firefighters trying to put out the grass fire.