What does the term "subrogation" refer to in Colorado insurance terms?

The term "subrogation" in the context of Colorado insurance refers to the right for an insurer to act on behalf of the insured. This legal principle allows an insurance company to pursue recovery of costs from a third party that is responsible for causing a loss to the insured. Essentially, when an insurer pays a claim to the insured for a loss, it gains the right to seek reimbursement from the party at fault. This mechanism helps ensure that the individual who caused the loss ultimately bears the financial responsibility, while preventing the insured from receiving money from both the insurer and the third party.

The other options describe different concepts in the insurance world but do not accurately capture the meaning of subrogation. For instance, the obligation of a policyholder to report a claim pertains to the insured's responsibilities but does not relate to subrogation. Similarly, a premium increase doesn't pertain to the recovery of costs or the relationship dynamics between insurer and insured. Finally, dispute resolution is a separate process that can occur after claims are made and does not describe subrogation directly. Understanding subrogation is crucial as it ensures the efficient operation of insurance systems and helps maintain lower premium costs by allowing insurers to recoup losses from liable parties.