If an insured collects damages under their insurance policy instead of pursuing the other party, what happens to the insured's rights against the other party?

• A. The insured's rights against the other party remain with the insured.
• B. The insurer acquires the insured's rights to sue the other party.
• C. The insured loses all rights to pursue the other party.
• D. The policy is canceled automatically.

Answer: (B)

Subrogation is the concept at work here. When the insured is paid by the insurer for damages, the insurer steps into the insured’s position to pursue the party responsible for the loss. That means the insurer acquires the insured’s rights to sue the other party and recover the amount paid on the claim. The insured doesn’t get to pursue the third party for that same recovery on their own; instead, the insurer handles the recovery to reimburse the claim payment. This arrangement prevents double recovery and helps keep insurance costs down.