What is "subrogation" in the context of title insurance?

Subrogation in the context of title insurance refers specifically to the right of the title insurance company to pursue claims against third parties after it has paid a claim to the policyholder. This process allows the insurer to step into the shoes of the insured and seek reimbursement from those who may be legally responsible for the loss or damage.

By exercising subrogation, the title insurance company can recover the costs of claims it has paid out, thus protecting its own financial interests and ultimately keeping premiums manageable for policyholders. For example, if a title defect arises due to an error by a third party, the insurer can demand compensation from that party after covering the loss for its insured.

This concept is essential in the insurance industry because it helps ensure that the losses are borne by the party at fault rather than by the insurer, which allows for the sustainable operation of insurance, including title insurance, over time.