After paying the insured the full insured value of a damaged commercial freezer, the insurer claims the damaged freezer itself. This right is best described as which of the following?
a.Subrogation, the insurer's pursuit of a negligent third party whose fault caused the loss, after it has paid its own insured
b.The insurer's right of salvage in the damaged property after settling the loss
c.Reformation of the insurance contract to correct a drafting error
d.A coinsurance penalty, the reduction in a loss payment applied when property is insured for less than the required percentage of value
Explanation
Once the insurer has paid the insured the full insured value of a damaged item, salvage rights let the insurer take possession of the damaged property and recover whatever value remains by selling it. Subrogation is different: it lets the insurer pursue a third party whose fault caused the loss.
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