What is the right of the insurer, after paying the insured for a covered loss, to take over all the insured's legal rights against negligent third parties?

What is the right of the insurer, after paying the insured for a covered loss, to take over all the insured's legal rights against negligent third parties?

• A. Subrogation
• B. Assignment
• C. Indemnity
• D. Waiver

Answer: (A)

Subrogation is the insurer’s right to step into the insured’s shoes and pursue recovery from the negligent third party after a covered loss has been paid. Once the insurer pays the claim, it is entitled to be repaid by the party at fault, effectively giving the insurer the insured’s legal claim against that party for the amount paid. This prevents the insured from getting paid again by another source and helps keep insurance affordable by letting the responsible party ultimately bear the cost of the loss. This isn’t about permanently transferring the insured’s rights (assignment), and it isn’t merely about restoring the insured to the pre-loss position (indemnity) in a way that involves pursuing the third party. It’s specifically about the insurer taking up the insured’s right to sue the responsible party to recover the amount paid. It also isn’t about waiving rights, which would mean giving up a claim altogether.

Subrogation is the insurer’s right to step into the insured’s shoes and pursue recovery from the negligent third party after a covered loss has been paid. Once the insurer pays the claim, it is entitled to be repaid by the party at fault, effectively giving the insurer the insured’s legal claim against that party for the amount paid. This prevents the insured from getting paid again by another source and helps keep insurance affordable by letting the responsible party ultimately bear the cost of the loss.

This isn’t about permanently transferring the insured’s rights (assignment), and it isn’t merely about restoring the insured to the pre-loss position (indemnity) in a way that involves pursuing the third party. It’s specifically about the insurer taking up the insured’s right to sue the responsible party to recover the amount paid. It also isn’t about waiving rights, which would mean giving up a claim altogether.