Property Insurance FundamentalsQuestion 194 of 215
A neighbor negligently starts a fire that damages the insured's garage. The insurer pays the insured for the loss and then sues the neighbor to recover what it paid. This step is BEST described as which of the following?
a.Coinsurance
b.Salvage
c.Subrogation
d.Liberalization
Explanation
Subrogation is the insurer's right to step into the insured's legal shoes and pursue a third party whose conduct caused the loss, up to the amount the insurer paid. The insured cannot impair this right (for example, by releasing the wrongdoer before settlement), and the insured must not recover twice for the same loss.
Law Reference: Subrogation principle; Cal. Ins. Code §22Practice all 215 questions free — no signup required.
Related questions on this topic
- Under a typical commercial property vacancy provision, what generally happens if the building is vacant for more than 60 consecutive days before a covered loss occurs?
- An insured owns a matched pair of antique candlesticks. One candlestick is destroyed by a covered peril. Under a typical pair-and-set clause, how is the loss settled?
- 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 building is insured by two property policies covering the same interest: Policy A with a $200,000 limit and Policy B with a $300,000 limit. A covered $50,000 loss occurs. Under a pro-rata other-insurance clause, how is the loss shared?
- Under a 'contribution by equal shares' other-insurance method, how do two policies generally share a loss?
- After a fire, a city building code requires the entire damaged structure to be torn down and rebuilt to current standards even though only 40% was burned. A standard property policy WITHOUT an ordinance-or-law endorsement generally responds how to the extra demolition and code-upgrade costs?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California Property & Casualty Insurance License Exam · How we review