What is "subrogation" in the context of legal claims?

Subrogation refers specifically to the legal principle where one party is substituted in place of another party, particularly in the context of claims. It typically occurs when an insurance company pays a claim to its insured and then seeks to recover that amount from a third party who is actually responsible for the loss. Through subrogation, the insurance company assumes the rights of the insured to pursue the liable third party for damages.

This concept is crucial in insurance law, as it ensures that a party who is ultimately responsible for a loss is held accountable, while allowing the insurer to mitigate its financial exposure after compensating the insured. Understanding subrogation is essential for those engaged in legal claims, as it reinforces the interconnectedness of liability and the avenues through which claims can be pursued.