What does "subrogation" typically allow in liability insurance?

Subrogation is a key principle in liability insurance that enables insurers to seek reimbursement from third parties who are responsible for a loss after they have paid the insured for that same loss. When an insurance company covers a claim, they may have the right to "step into the shoes" of the insured and take legal action against the party at fault. This process helps ensure that the insurer can recover some or all of the costs they incurred by compensating the insured, while also holding the responsible party accountable for their actions.

This mechanism not only helps insurance companies manage their overall costs but also serves to decrease insurance premiums over time by keeping claims costs down. It is a critical process that enhances the financial balance of the insurance system by preventing losses from being absorbed solely by the insurer.