By exercising its right of subrogation, what can an insurer recover from a third party?

The correct answer is that an insurer can recover costs from a third party by exercising its right of subrogation. Subrogation is a legal principle that allows an insurer, after paying a claim to the insured, to step into the shoes of the insured and pursue any legal rights the insured may have against a third party that caused the loss. This means that the insurer can seek to recover the amount it has paid out in claims from the responsible party.

For example, if an insured party suffers a loss due to the negligence of another party, the insurer can pay the claim to the insured and then seek to recover that amount from the negligent party through subrogation. This not only helps maintain the insurer’s financial stability but also reinforces the principle that the party at fault should ultimately bear the costs of their actions.

Other options do not accurately describe the function of subrogation. Some imply processes that relate to how losses are calculated or shared among insurers or insured parties rather than focusing on the insurer's right to recover funds directly from a responsible third party.