What legal principle allows an insurance provider to claim compensation from a third party?

The principle of subrogation is key in the context of insurance claims and compensation. Subrogation allows an insurance provider to step into the shoes of the insured party after compensating them for a loss. If the loss was caused by a third party’s negligence or wrongful act, the insurer has the right to pursue that third party for reimbursement of the amount paid out to the insured.

This practice helps to prevent the insured party from receiving a double recovery—being compensated by both the insurer and the responsible third party for the same loss. Subrogation serves to uphold the principle of liability, ensuring that the party responsible for the damage ultimately bears the financial burden of their actions.

In stark contrast, negligence involves failing to act as a reasonable person would, which can lead to liability, but it does not specifically describe the relationship between an insurer and a third party. Litigation refers to the process of taking legal action, while settlements relate to agreements reached between parties to resolve claims without going to court. However, these concepts do not specifically capture the right or ability of an insurer to seek compensation from a third party after an insured event.