What legal principle allows insurance companies to collect from the party at fault?

The legal principle that allows insurance companies to collect from the party at fault is subrogation. This process occurs after an insurance company pays for a loss suffered by its insured. Instead of allowing the insured to retain the benefit of the payment and the right to seek reimbursement from the at-fault party, subrogation enables the insurance company to "step into the shoes" of the insured and pursue recovery from the responsible party.

Through subrogation, the insurer seeks to recover the amount it paid to settle the claim from the party that caused the loss. This principle is essential as it helps to prevent the insured from receiving a windfall and promotes accountability by ensuring that the party at fault is held responsible for their actions.

In contrast, indemnification refers to the compensation for harm or loss and does not specifically address the insurance company's right to recover from the liable party. Negligence is a legal term that describes a failure to exercise reasonable care, which can lead to liability, but it is not the mechanism by which insurers recover claim payments. Liability refers to the legal responsibility for one's actions or inactions but does not detail the process of an insurer pursuing reimbursement.