When does an insurer normally exercise subrogation rights?

Subrogation is a critical principle in insurance that allows an insurer to step into the shoes of the insured after they have paid a claim, enabling the insurer to pursue recovery from a third party responsible for the loss. This process protects the insurer's financial interests by allowing them to recover some or all of the costs incurred from the claim payout.

When a claim has occurred and the insurer has made a payment, they can exercise their subrogation rights to seek reimbursement from a liable party. This action is based on the understanding that the insured should not be compensated more than once for the same loss and that the responsible party should ultimately pay for the damages they caused.

In contrast, other situations mentioned do not pertain to subrogation. A policyholder failing to pay premiums or disclose relevant information typically relates to issues of coverage or potential policy voidance rather than recovery rights post-claim. Similarly, having two policies covering the same risk leads to potential contribution or apportionment issues, not subrogation, as the focus shifts to liability between insurers rather than recovery from a third party.