What is the process called where an insurer recovers the amount paid from a liable party after covering a loss?

Subrogation is the correct term that describes the process in which an insurer seeks to recover the amount it has paid out to an insured party from another party that is found to be liable for the loss. This mechanism allows the insurer to step into the shoes of the insured after compensating a loss, effectively taking over the insured's right to pursue recovery from the third party.

For example, if an insurance company pays for damage caused by another person's negligence, the insurer can then pursue the negligent party to recover those costs. This process is essential in the insurance industry as it helps to minimize losses for insurers and keep premium costs lower for policyholders by enabling the recovery of funds from responsible parties.

The other terms provided in the choices have distinct meanings. Reimbursement generally refers to an insured returning funds after the insured has made a claim. Indemnity is a broader concept that denotes compensation for damage or loss, ensuring that a party is restored to its financial position prior to the loss but does not specifically involve recovering from third parties. Liability recovery is not a standard term used in insurance practice, making subrogation the precise and commonly accepted term for this situation.