Question 84

The amount an insurer can recover through subrogation is always decided by a court of law.

This statement is false because the amount an insurer can recover through subrogation may be determined through negotiation, settlement, or other means, rather than exclusively through a court decision.

A) Subrogation allows the insurer to demand payment from the negligent party after paying the policyholder.

This statement is true as subrogation is a process that enables an insurer to pursue recovery from the party responsible for the loss after compensating the policyholder. It reflects the core principle of subrogation, which is to allow insurers to recoup costs.

B) Subrogation prevents a policyholder from legally being compensated twice for the same loss.

This statement is true and accurately describes one of the primary functions of subrogation. It ensures that a policyholder does not receive double compensation for a single loss, maintaining fairness in the insurance process.

C) The policyholder transfers their right to the insurer to recover losses from the negligent party.

This statement is correct as subrogation involves the policyholder assigning their rights to the insurer, allowing the insurer to pursue claims against the negligent party. This transfer is central to the operation of subrogation.

D) The amount an insurer can recover through subrogation is always decided by a court of law.

This statement is false because recovery amounts can often be settled out of court or through negotiations between the insurer and the negligent party, not strictly determined by a court ruling.

Conclusion

The correct answer is D, as it misrepresents the process of subrogation by implying that court decisions dictate the recovery amounts in all cases. Options A, B, and C accurately reflect the principles and functions of subrogation, making D the only false statement among the choices provided.