In mortgage practice, subrogation involves which party recovering damages after paying a claim?

• A. The lender
• B. The borrower
• C. The insurer
• D. The title company

Answer: (D)

Subrogation is when the party that pays a claim gains the right to recover those costs from the party responsible for causing the loss. In mortgage practice, title insurance is the protection at play. When a covered title defect leads to a loss, the title company pays the claim to the insured and then steps into the insured’s position to pursue reimbursement from the party responsible for the defect. This mechanism keeps the cost of the loss from falling entirely on the insurer and ensures fault is allocated to the actual cause of the damage. So, after paying the claim, the entity that recovers damages is the title company. The lender or borrower benefit from the payment, but the recovery action itself is carried out by the insurer—the title company—through subrogation.