South Carolina Personal Lines Practice Exam

Do subrogation rights apply to physical damage caused by a person with reasonable belief they were entitled to use it?

1. Yes

2. No

3. Only with insurance approval

4. Depends on the situation

The correct answer is: No

Subrogation rights are a legal concept that allows an insurance company to pursue a third party that caused an insurance loss to the insured. In situations where a person damages property, subrogation typically applies only if the person causing the damage lacked a legal entitlement to use that property. If the individual believed in good faith that they were entitled to use the property (even if they were mistaken), this reasonable belief can negate the grounds for subrogation. This belief can be integral to the assessment of liability. When the person causing the damage can demonstrate a reasonable belief of entitlement, it suggests that they did not act with negligence or malice. Therefore, subrogation rights would not typically apply, because the insurance company would likely be unable to recover costs associated with damages from an individual who reasonably believed they had the right to use the property. This upholds the principle that insurance should not be used to penalize individuals who act under the impression of entitlement if that belief is reasonable.