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⚖️ '''Right of recovery''' is the legal entitlement of an [[Definition:Insurance carrier | insurance carrier]] to recoup amounts it has paid on a [[Definition:Claim | claim]] from a responsible third party, another insurer, or sometimes the [[Definition:Policyholder | policyholder]] themselves when circumstances warrant reimbursement. This right is foundational to the [[Definition:Principle of indemnity | principle of indemnity]] — the idea that insurance should restore the insured to the same financial position as before the loss, not create a windfall — and it prevents third parties who caused the loss from escaping financial responsibility simply because the injured party carried insurance.

🔧 The most common mechanism through which the right of recovery operates is [[Definition:Subrogation | subrogation]]. After paying a [[Definition:First-party claim | first-party claim]], the insurer "steps into the shoes" of the insured and pursues the [[Definition:Negligent party | at-fault party]] or their insurer for reimbursement. In [[Definition:Health insurance | health insurance]], the right of recovery may also arise through [[Definition:Coordination of benefits | coordination of benefits]] provisions when multiple policies cover the same loss, or through [[Definition:Reimbursement | reimbursement]] clauses when a policyholder receives a settlement from a [[Definition:Tortfeasor | tortfeasor]]. In [[Definition:Reinsurance | reinsurance]], a [[Definition:Cedent | cedent]] that recovers amounts from third parties after the reinsurer has already contributed to the loss is generally obligated to pass back the reinsurer's proportionate share. The specific scope and procedures for exercising the right of recovery are governed by [[Definition:Policy language | policy language]], applicable state or national law, and in some cases contractual agreements like [[Definition:Hold harmless agreement | hold harmless]] or [[Definition:Contribution agreement | contribution agreements]] between co-insurers.

💰 Effective pursuit of recovery rights has a material impact on an insurer's [[Definition:Loss ratio | loss ratio]] and overall profitability. Carriers with sophisticated [[Definition:Subrogation | subrogation]] units or those leveraging [[Definition:Insurtech | insurtech]] analytics to identify recovery opportunities can meaningfully offset [[Definition:Paid losses | paid losses]], which in turn benefits the broader [[Definition:Risk pool | risk pool]] by helping to moderate [[Definition:Premium | premium]] increases. Conversely, failing to exercise recovery rights — whether through operational neglect or inadequate tracking — leaves money on the table and can draw scrutiny from [[Definition:Reinsurer | reinsurers]] and regulators who expect carriers to mitigate net losses diligently. For policyholders, understanding how the right of recovery works is important because cooperation clauses in most policies require them to assist the insurer's recovery efforts and to avoid settling with third parties in ways that could prejudice the carrier's claim.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Subrogation]]
* [[Definition:Principle of indemnity]]
* [[Definition:Coordination of benefits]]
* [[Definition:Salvage]]
* [[Definition:Contribution]]
* [[Definition:Waiver of subrogation]]
{{Div col end}}

Definition:Right of recovery - Revision history

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