Subrogation
Subrogation is a legal principle that allows one party to step into the shoes of another party to pursue a claim or remedy. It is commonly used in insurance and finance, where an insurer who has paid a loss to an insured party can seek reimbursement from a third party that caused the loss.
In a typical scenario, when an insured individual suffers a loss due to the negligence of another party, their insurance company compensates them for the damage. After making this payment, the insurer gains the right to pursue the negligent party for recovery of the loss amount. This right of the insurer to recover the costs from the wrongdoer is known as subrogation.
For example, if a driver is involved in an accident where another driver is at fault, the injured driver’s insurance may cover the medical expenses and vehicle repairs. Once the insurance company pays these costs, it can file a subrogation claim against the at-fault driver to recover the amounts it has paid out.
Subrogation serves to prevent the insured from receiving a double recovery for the same loss and ensures that the party responsible for the loss ultimately bears the financial burden. It is an essential mechanism in risk management and liability allocation within various legal and insurance frameworks.
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