What is subrogation in the context of insurance?

Subrogation in the context of insurance refers to the right of an insurance company to recover the amount it has paid for a claim from a third party that is deemed responsible for the loss. When an insurer pays a claim to its insured, it effectively steps into the shoes of the policyholder and gains the legal right to pursue any claims against another party that contributed to the loss. This process helps the insurer recover costs and also helps prevent the insured from being compensated twice for the same loss.

In practical terms, if an insured individual suffers damages due to the negligence of another party and their insurance company pays for those damages, the insurance company can then seek reimbursement from the responsible party or their insurer through the mechanism of subrogation. This right not only protects the financial interests of insurance companies but also ensures that responsible parties are held accountable for their actions.