What does subrogation refer to in the context of insurance claims?

Subrogation in the context of insurance claims refers to the process by which an insurance company seeks reimbursement from a third party that is responsible for a loss for which the insurance company has already paid a claim to the insured. When an insurer pays for a loss, it often has the right to pursue any legal action against the party at fault to recover the amount paid out in claims. This concept helps ensure that the financial burden falls on the responsible party rather than the insurance provider or the policyholder.

Understanding subrogation is crucial because it enables insurance companies to minimize their losses and ultimately reduce the overall costs of insurance for their clients. It serves to hold the responsible party accountable and reinforces the principle that liability should rest with the party at fault in a loss situation.

By contrast, the other options do not accurately describe subrogation. Estimating property value pertains to valuations necessary before claims can be settled, while filing a property claim refers to the initiation of a claim process. Determining claim settlements involves assessing and finalizing claim amounts, which is distinct from the recovery aspect that subrogation addresses.