What role does "subrogation" play in commercial casualty insurance?

Subrogation is a fundamental principle in commercial casualty insurance that enables insurers to recover costs after they have paid for a loss. When an insurer compensates a policyholder for a claim—whether due to property damage, bodily injury, or other losses—the insurer may have the right to seek reimbursement from a third party that is responsible for causing the loss in the first place. This process ensures that the financial burden of the loss ultimately falls on the party at fault rather than the insurer or the insured.

By allowing insurers to pursue recovery from third parties, subrogation helps maintain the integrity of the insurance system. It ensures that losses are borne by those who are legally liable, which in turn can help keep insurance premiums more manageable for all policyholders. If insurers routinely absorbed costs without recovering from responsible parties, they would likely need to raise premiums to cover those losses.

This principle thus serves both the interests of the insurance company and the insured, facilitating a more equitable distribution of losses among liable parties. Other answers, such as those suggesting that subrogation reduces premiums, prevents claim filing, or provides coverage for damages, do not accurately capture its role in the insurance process.