What is the legal process used by insurers to collect from a responsible third party?

The correct answer is subrogation. This legal process occurs when an insurance company, after paying a claim to its insured for a loss, seeks to recover the amount paid from a third party that is deemed responsible for that loss. Subrogation allows insurers to step into the shoes of their insured to pursue a claim against the responsible party, effectively ensuring that the financial burden is placed on the party at fault rather than on the insurer.

This process is critical in promoting fairness in the insurance system because it helps prevent insured individuals from profiting from their losses while also allowing insurers to mitigate their payout losses. By recovering funds through subrogation, insurers can maintain lower premiums for their policyholders.

Other choices include processes such as litigation, which refers to taking legal action or bringing a lawsuit, but subrogation specifically pertains to the recovery process following the settlement of a claim. Claim adjustment involves evaluating and processing claims rather than collecting from third parties, and arbitration is a method of resolving disputes outside of court that does not pertain to the specific recovery process between an insurer and a responsible third party.