West Virginia Adjusters Practice Exam

Subrogation is a fundamental concept in the insurance industry that occurs when an insurance company seeks reimbursement from a third party responsible for a loss after it has already compensated its insured. The process allows the insurer to recover some or all of the costs it incurred in paying a claim, thereby helping to keep insurance premiums in check and ensuring that the liability rests with the party at fault.

This process typically happens after a claim is settled; if, for example, an insured person was involved in an accident caused by another driver, the insurance company may pay the claim to its insured and then pursue recovery from the at-fault driver's insurance company. Subrogation effectively allows the insurer to step into the shoes of the insured, reinforcing accountability and the principle of indemnity, where the insured is made whole without gaining any undue profit from their loss.

Understanding subrogation is crucial for insurance professionals, including adjusters, as it highlights the need to identify potentially liable parties in a claim and the financial responsibilities associated with various stakeholders in the claim process.