What is the term for the insurance company's right to seek compensation from the party that caused the loss?

Subrogation is the term used to describe the process through which an insurance company gains the right to pursue compensation from a third party that is responsible for a loss after having already paid a claim to its insured. This mechanism allows the insurance company to recover the costs associated with that claim, effectively stepping into the shoes of the insured for the purpose of seeking reimbursement.

In practical terms, once the insurer pays the policyholder for a covered loss, it can then take legal action against the responsible party to reclaim some or all of the costs incurred. This process helps to minimize the financial impact on the insurer and ultimately keeps insurance premiums more stable for all policyholders. The concept of subrogation encourages accountability among parties that may cause damage and reinforces the principle of liability.

Contribution, while related, refers to situations where multiple insurance policies might apply to the same loss, and insurers share the cost of the claim. A No Claims Bonus is a discount offered by insurers for not making a claim over a certain period, and the Average Clause pertains to how claims are settled based on proportions when an insured item is underinsured. Each of these terms serves a different function within insurance contexts, but subrogation specifically pertains to seeking compensation from the party at fault.