Right of Recourse Provision
Definition
Right of Recourse Provision — a provision in fiduciary liability policies giving an insurer the right to
subrogate against an insured. (Subrogation is the process by which an insurer
collects monies from a party responsible for causing a loss, for which an
insurer has already made an indemnity payment.) For example, assume that a
fiduciary's negligence in administering an employee benefit plan caused a
loss that was covered by a fiduciary liability policy. After the insurer pays
that loss, a right of recourse provision would give the insurer the right to
seek reimbursement from the fiduciary whose negligence caused that loss. Right
of recourse provisions represent an exception to the general practice in the
insurance industry whereby insurers do not subrogate against insureds. Within
the past decade, however, right of recourse provisions have become relatively
uncommon. In fact, few fiduciary liability insurers currently include right of
recourse provisions in their forms. Instead, most fiduciary liability forms are
silent as to the issue of subrogating against an insured.