CMFAS BCP Principles of Insurance question: distinction between subrogation and contribution

CMFAS BCPPrinciples of Insurance

The KEY distinction between subrogation and contribution is that:

A Subrogation applies before a claim is paid, while contribution applies only after payment
B Subrogation recovers from a THIRD PARTY who caused the loss; contribution shares it between INSURERS
C Subrogation applies only to life and health policies, while contribution applies only to fire and motor policies
D Contribution recovers from the negligent THIRD PARTY, while subrogation shares the loss between INSURERS

Show the answer and explanation

Answer: B. Subrogation recovers from a THIRD PARTY who caused the loss; contribution shares it between INSURERS

Subrogation recovers from a third party who caused the loss; contribution shares one loss between two or more insurers who each cover the same subject matter, interest and peril. Both stem from indemnity and both prevent the insured recovering more than the loss.

Common mistake

Do not swap them: subrogation = recover from the wrongdoer; contribution = share between co-insurers.

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CMFAS BCP Principles of Insurance question: distinction between subrogation and contribution

Answer: B. Subrogation recovers from a THIRD PARTY who caused the loss; contribution shares it between INSURERS

Common mistake

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CMFAS BCP Principles of Insurance question: distinction between subrogation and contribution

Answer: B. Subrogation recovers from a THIRD PARTY who caused the loss; contribution shares it between INSURERS

Common mistake

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