In insurance law, what does "subrogation" allow an insurer to do?

Subrogation is a legal principle in insurance law that enables an insurer to step into the shoes of the insured after it has paid a claim to recover the costs from a third party that is responsible for the loss. When an insurer compensates its policyholder for a loss resulting from the actions or negligence of another party, subrogation permits the insurer to seek reimbursement from that third party. This ensures that the party responsible for the loss ultimately bears the financial burden and prevents the insured from receiving a double recovery for the same loss.

This mechanism is foundational in helping insurers control their losses and maintain lower premium costs for policyholders. It emphasizes the principle that a party at fault for an incident should be held accountable, and it facilitates the recouping of funds by the insurance company after compensating the insured. Thus, the correct answer reflects the essence of subrogation, which is the right of the insurer to pursue a third party responsible for a loss.