Question

Smalltown contracted with Construction Co. (CC) to repave a street. CC was required to obtain a performance bond, which it did, from Bond Co. While the crew was paving, a distracted driver whizzed by the flagger and crashed into the paving machinery. All three CC employees were injured and hospitalized. Bond Co. performed to Smalltown, and now seeks compensation from the distracted driver. This is _____________.
reimbursement
contribution
restitution
subrogation
exoneration

Answer 1

Ans: Subrogation.

Subrogation in legal parlance refers to an act of legally pursuing a third party that is responsible for causing an insurance loss to the party insured. The aim is to recover the amount paid by the insurer to the party insured for the loss. In the above example, the Bond Co acting as an insurance carrier has covered driver for the loss caused and then under subrogation will pursue a legal course of action against the crew causing the whizzing or the driver whosoever is found responsible.