What does Subrogation allow an insurance company to do?

Subrogation is a legal and contractual process allowing an insurance company to pursue a third party that caused a loss to recover costs it has paid to policyholders. When an insurer compensates its insured for a loss caused by another party, subrogation enables the insurer to step into the insured’s shoes and seek reimbursement from the responsible party or their insurer. This process helps to hold the responsible party accountable for their actions while also helping the insurance company mitigate its own losses.

In this context, if an insured party experiences damage due to the negligence of another, once the insurer covers the claims, it can then file a subrogation claim against that third party. This mechanism is vital for maintaining the efficiency and fairness of the insurance system, as it helps to prevent the insured from profiting from both their insurance coverage and the responsible third party at the same time.