What is the legal action allowed for an insurer against the third party responsible for a loss called?

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Study for the Louisiana Series 103 – Life, Health, and Accident or Sickness Insurance Exam. Familiarize yourself with key concepts through engaging questions and explanations. Prepare effectively for your exam!

Multiple Choice

What is the legal action allowed for an insurer against the third party responsible for a loss called?

Explanation:
Subrogation is the insurer’s right to sue the third party who caused the loss after the insurer has paid the claim to the insured. This lets the insurer recover the amount paid and prevents the insured from being paid twice. For example, if another driver is at fault, the insurer pays the insured’s medical and repair costs and then pursues legal action against that driver to recoup those costs. Not reinsurance, which is about insurers sharing risk; not indemnification, which is simply compensating to restore the insured’s financial position; and not settlement, which is an agreement to end a claim.

Subrogation is the insurer’s right to sue the third party who caused the loss after the insurer has paid the claim to the insured. This lets the insurer recover the amount paid and prevents the insured from being paid twice. For example, if another driver is at fault, the insurer pays the insured’s medical and repair costs and then pursues legal action against that driver to recoup those costs. Not reinsurance, which is about insurers sharing risk; not indemnification, which is simply compensating to restore the insured’s financial position; and not settlement, which is an agreement to end a claim.

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