Policy Structure & ProvisionsQuestion 470 of 474
A contractor's negligence floods the insured's kitchen, and the insured signs a paper releasing the contractor. The insurer may then:
a.Pay in full and then sue the insured
b.Refuse to pay what it cannot recover
c.Cancel the policy back to its start date
d.Pay the claim and still sue the contractor
Explanation
The subrogation condition transfers the insured's rights of recovery to the insurer once it pays, and it forbids the insured from doing anything after a loss that impairs those rights. An insured who releases the negligent party destroys the insurer's recovery and can lose the claim to that extent. A release given before any loss is a different matter and is generally permitted in writing.
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