Julie's bicycle was damaged by a negligent third party. If her insurer pays £1,500 and she retains a salvage valued at £500, what is the value of the insurer's subrogation rights?

To determine the value of the insurer's subrogation rights in this scenario, we need to understand subrogation within the context of insurance claims. Subrogation is the process by which an insurer gains the right to pursue a third party that caused an insurance loss to their insured, in order to recover the amount of the claim paid to the insured.

In Julie’s case, her insurer paid £1,500 for the damage to her bicycle, which represents the total amount indemnified for the loss incurred because of the negligent third party. Since Julie retained a salvage valued at £500, this salvage does not affect the total amount the insurer can recover through subrogation.

Here’s the reasoning: the insurer’s subrogation rights allow them to seek recovery of the total amount they have paid out, which is the £1,500. The presence of the salvage value affects only Julie’s total loss but not the insurer's recovery rights. Therefore, the correct answer reflects the total amount that the insurer has the right to reclaim from the third party. The value of the subrogation rights is thus £1,500.

It's important to distinguish between the total claim paid and the salvage value retained by the insured, as the insurer