Which legal principle allows an insurer to pursue a claim against a third party after compensating an insured?

• A. Subrogation
• B. Indemnification
• C. Assignment
• D. Contribution

Answer: (A)

The correct answer is subrogation. This legal principle enables an insurer to step into the shoes of the insured after it has paid a claim. Essentially, when an insurance company compensates its insured for a loss caused by a third party, subrogation allows the insurer to seek reimbursement from that third party. This process helps ensure that the insurer can recover some or all of the funds it paid out in claims, thus preventing the insured from receiving a double recovery for the same loss—once from the insurer and potentially again from the responsible third party.

In the context of insurance, subrogation is crucial because it maintains fairness in the system and promotes accountability. By allowing the insurer to pursue the responsible party, it helps mitigate costs and can ultimately lead to lower premiums for insured individuals.

Other concepts mentioned, such as indemnification, assignment, and contribution, serve different purposes in the field of insurance and do not specifically pertain to the insurer's right to recover from third parties after paying a claim. Indemnification refers to compensating someone for loss or damage, assignment involves transferring rights or benefits under a policy, and contribution relates to how multiple insurers share a loss when they cover the same risk. Each serves its own function but does not directly relate