How does "subrogation" work in insurance claims?

Subrogation is a crucial principle in insurance law that allows an insurer to step into the shoes of the insured after the insurer has paid a claim. This process enables the insurer to pursue recovery of the amount paid for claims against a third party who was responsible for the loss. By exercising its right of subrogation, the insurer seeks to recover funds from the party at fault, thereby minimizing its own financial loss and potentially keeping premiums lower for insured parties.

When an insurer compensates the insured for a loss, such as damages from an accident caused by another driver, the insurer gains the right to seek repayment from that driver or their insurance company. This right to recover funds is what makes subrogation an important mechanism in the insurance industry, ensuring that those who are responsible for losses ultimately bear the financial burden.

The other options don't accurately reflect the concept of subrogation. For example, claiming that the insured cannot recover losses misrepresents how insurance operates, since the insured can typically seek coverage for their losses initially. Moreover, stating that the insurer has no right of recovery contradicts the very definition of subrogation, which is about the right to recovery. Finally, defining subrogation as a form of claim denial misunderstands its purpose,