What term describes the insurer's right to recover from another responsible party the amount paid to its insured for a covered loss?

What term describes the insurer's right to recover from another responsible party the amount paid to its insured for a covered loss?

• A. Recovery
• B. Subrogation
• C. Negligence
• D. Non-waiver agreement

Answer: (B)

Subrogation is the insurer’s right to recover from the party responsible for the loss the amount it paid to its insured. After paying a claim, the insurer steps into the insured’s shoes and pursues reimbursement from the at-fault party (or that party’s insurer) to recoup the payout. This preserves the indemnity principle—the insured shouldn’t benefit from the loss twice—and discourages careless or fraudulent behavior by making the responsible party pay. For example, in a car crash, once the insurer covers the repair costs for the insured, it can seek recovery from the other driver or their insurer. The other options don’t fit: recovery is too general, negligence is a fault standard, and a non-waiver agreement is about waiving rights rather than recouping paid claims.

Subrogation is the insurer’s right to recover from the party responsible for the loss the amount it paid to its insured. After paying a claim, the insurer steps into the insured’s shoes and pursues reimbursement from the at-fault party (or that party’s insurer) to recoup the payout. This preserves the indemnity principle—the insured shouldn’t benefit from the loss twice—and discourages careless or fraudulent behavior by making the responsible party pay. For example, in a car crash, once the insurer covers the repair costs for the insured, it can seek recovery from the other driver or their insurer. The other options don’t fit: recovery is too general, negligence is a fault standard, and a non-waiver agreement is about waiving rights rather than recouping paid claims.