What is subrogation in the context of insurance?

Subrogation in the context of insurance refers to the process where the insurer assumes the rights of the insured to recover losses from a third party responsible for those losses. When an insured individual suffers a loss and makes a claim, the insurance company will pay for the damages or the loss incurred. After compensating the insured, the insurer can then pursue recovery from the party that caused the damage, effectively stepping into the shoes of the insured. This mechanism helps the insurer recoup some or all of the money that was paid out for the claim, ensuring that the costs are ultimately borne by the party at fault rather than by the insurer.

In this way, subrogation promotes fairness and helps keep insurance premiums manageable by allowing insurers to recover their expenses. This also reinforces the principle of "one loss, one payment," where the insured is not allowed to profit from the insurance policy beyond what they lost. Thus, when considering the context of subrogation, the notion that the insurer takes on the rights to recover damages from a third party is central and defines the relationship and responsibilities between the insurer, the insured, and the party responsible for the loss.