What does the Subrogation Clause allow insurance carriers to do?

The Subrogation Clause is fundamentally about an insurer's rights following a loss that has been compensated to the insured. When an insurance company pays for a loss covered under a policy, the Subrogation Clause allows the insurer to step into the shoes of the insured and seek reimbursement from a third party that may have been responsible for causing that loss. This means the insurance company can legally pursue that responsible third party to recover the funds it has paid out to the insured.

This process not only helps insurance companies recover their costs but also discourages negligent behavior by holding the responsible party accountable. The recovery process can reduce the overall costs of insurance, which can benefit all policyholders indirectly through lower premiums in the long run.

The other options center around different aspects of the insurer-insured relationship but do not relate to the specific function and purpose of subrogation. Subrogation specifically deals with the transfer of rights to pursue a third party for compensation after a loss has been indemnified.