Q.After paying a policyholder in full for damage caused to their insured car by a careless third-party driver, the insurance company acquires the right to sue that careless driver itself to recover the amount paid. This right is called:
(A) Contribution
(B) Proximate Cause
(C) Subrogation
(D) Mitigation of Loss

Once the insurer has indemnified the insured in full, it steps into the insured's own legal shoes to recover the loss from the party actually at fault — this is subrogation.

Subrogation is the insurer's right, once it has fully indemnified the insured for a loss, to step into the insured's own legal position and pursue the recovery of that same loss from any third party who was actually responsible for causing it. This prevents the insured from being paid twice over for the same loss — once by the insurer and again by the party at fault.

Option-by-option analysis:

• (A) Incorrect — Contribution concerns sharing a loss between MULTIPLE INSURERS on the same risk, not recovery from a third party. …