General Insurance PrinciplesQuestion 173 of 215
An insurer pays its insured $40,000 for collision damage caused entirely by a negligent third-party driver. The insurer then sues the at-fault driver to recover the $40,000. This action is BEST described as:
a.A coinsurance claim
b.A reinsurance recovery
c.An apportionment under an excess clause
d.Subrogation against the responsible third party
Explanation
Subrogation is the right of the insurer, after paying its insured, to step into the insured's shoes and pursue any third party legally responsible for the loss. Subrogation enforces the indemnity principle by preventing the insured from collecting twice and shifting the loss back to the at-fault party. Coinsurance and reinsurance address different problems.
Law Reference: Indemnity / subrogation principlesPractice all 215 questions free — no signup required.
Related questions on this topic
- An ambiguous exclusion appears in a homeowners policy. Under California law, the ambiguity will most likely be construed:
- A homeowner sells her house on April 1 but forgets to cancel her fire policy. The house burns on May 15. Under California property insurance law, the seller can recover:
- A commercial applicant fails to disclose that he was non-renewed by two prior carriers for arson suspicions. Under California law, the failure to disclose this material fact is:
- A California homeowner suffers a fire loss to a 15-year-old roof. The policy provides Actual Cash Value coverage. Under §2051 the insurer will pay:
- A commercial building has a replacement cost of $500,000 and a policy with an 80% coinsurance clause. The insured carries only $300,000 of insurance. After a $100,000 partial loss (ignore deductible), how much will the insurer pay?
- Two policies cover the same warehouse: Policy A with a $400,000 limit and Policy B with a $600,000 limit, each containing a pro-rata other-insurance clause. A covered $200,000 loss occurs. Policy A will pay:
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California Property & Casualty Insurance License Exam · How we review