What is the legal process that gives an insurer the right to seek recovery from a third party after paying a loss?

The legal process that grants an insurer the right to seek recovery from a third party after paying a loss is known as subrogation. This principle allows the insurance company to step into the shoes of the policyholder after it has compensated them for their loss and pursue any responsible third parties to recover the amounts paid.

For instance, if an insured party is involved in an accident caused by another driver, the insurer may pay the damages to the insured. Following this payment, the insurer can then seek to recover those costs from the at-fault driver or their insurance company through subrogation. This process not only helps mitigate the losses for the insurer but also upholds the principle of the policyholder being compensated for their loss while ensuring that the responsible party ultimately bears the financial burden.

In contrast, litigation refers to the process of taking legal action in court, which may occur during the subrogation process but does not specifically define the right to recover that arises after a payment. Reimbursement typically involves the return of premiums or other payments made by the policyholder, while indemnification refers to compensating someone for harm or loss, particularly in relation to insurance coverage but does not inherently involve seeking recovery from third parties. These distinctions clarify why subrogation is