While driving home from work, Bailey's car is struck from behind by a van full of drunken college students. Asimov is the driver of the van. The resulting damage to Bailey's car totals $7,000. Bailey files a claim under his own auto insurance policy to have his car repaired, but his insurance policy only covers $6,000 of the $7,000 loss. Bailey pays the remaining $1,000 of the loss out of his pocket. Which of the following is a true statement?
A) Bailey has no legal right of subrogation against Asimov for the $1,000 that he had to pay out of his pocket.
B) Bailey's insurer has no legal right of subrogation against Asimov for the $6,000 of damages it had to pay to Bailey.
C) Bailey has the right under the principle of indemnity to now sue Asimov personally for the $7,000 damages to his car.
D) Both Bailey and his insurer have subrogation RIGHTS against Asimov for the damages he (Asimov) caused.

Question

Quizplus · Accepted Answer

Subrogation is the legal right for the insurer or the insured to recover costs from a third party responsible for the loss. In this case, Bailey's insurer has the right of subrogation against Asimov for the $6,000 they paid to Bailey, and Bailey also has the right of subrogation against Asimov for the $1,000 he paid out of his pocket. Therefore, both Bailey and his insurer have subrogation rights against Asimov. Option A is incorrect because Bailey does have the right of subrogation against Asimov. Option B is incorrect because the insurer does have the right of subrogation against Asimov for the $6,000 they paid to Bailey. Option C is incorrect since Bailey cannot sue Asimov for more than the actual loss he suffered, which was only $7,000, and he has already been reimbursed $6,000 by his insurer.

While Driving Home from Work, Bailey's Car Is Struck from Behind