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Question

Difficulty: HardOccupational and Specialized Registers

After compensating a policyholder for vehicle damage caused by a reckless third party, an insurance company exercised its legal right to step into the insured person's position to sue the responsible driver for recovery of the settlement amount. Which specialized insurance register term refers to this legal right of substitution?

  1. A
    indemnity
  2. subrogationAnswer
  3. C
    subornation
  4. D
    reinsurance

Answer

subrogation
The correct answer is 'subrogation', which is the precise technical term in insurance law referring to an insurer's right to legally substitute itself for an indemnified policyholder in order to recover damages from the party legally liable for the loss.

Step-by-Step Solution

1
Analyze the contextual scenario described in the stem.
The situation describes an insurer compensating a policyholder and subsequently assuming the policyholder's legal rights to recover those funds from the responsible third party.
Occupational register questions require linking precise operational contexts with their formal technical terminology.
2
Evaluate potential register terms based on their specific legal and financial definitions.
'Subrogation' is the exact term for third-party legal substitution in insurance, distinguishing it from 'indemnity' (the underlying concept of compensation), 'reinsurance' (risk sharing among insurers), and 'subornation' (a criminal law term).
Differentiating between closely sounding paronyms and adjacent domain concepts is required to select the precise specialized register term.

Key Concept

Insurance and Legal Register
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Topics

Occupational and Specialized Registers

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