What is based on the principle that for a service rendered (i.e., the payment of the indemnity claim), the insured assigns to the insurer any rights that may inure to the insured from third parties.

Question

Options

• ASalvage
• BIndemnity payment
• CSubrogation
• DReinsurance resource

• A
  17% (8)
• B
  4% (2)
• C
  71% (34)
• D
  8% (4)

Explanation

Subrogation is correct because it is the legal doctrine by which an insurer, after paying a claim, "steps into the shoes" of the insured and acquires the insured's rights to pursue recovery from a responsible third party - the insured effectively assigns those rights to the insurer as a condition of receiving payment.

Salvage (A) refers to the insurer's right to take ownership of damaged property after paying a total loss claim - it's about physical property recovery, not third-party rights. Indemnity payment (B) is simply the act of compensating the insured for a covered loss; it describes the payment itself, not the legal mechanism of rights transfer that follows. Reinsurance resource (D) involves one insurer transferring risk to another insurer, which is entirely unrelated to the insured's rights against third parties.

Memory tip: Think of Subrogation as Substitution - the insurer substitutes itself in place of the insured to go after the party who actually caused the loss. If someone else is at fault, the insurer pays you first, then chases them.

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