Case study
A consumer named John purchased a new car from XYZ Motors. One day while driving, John suddenly lost control and crashed into a tree, resulting in serious injuries. It was later determined that a defect in the car's braking system caused the accident.
John filed a claim against XYZ Motors, seeking compensation for his injuries and damages to his car. XYZ Motors had product liability insurance, which covered such claims. The insurance company, upon investigation, determined that the defect in the braking system was indeed the cause of the accident and paid out John's claim.
However, since the accident was caused by a defect in the car, the insurance company was entitled to exercise the principle of subrogation, which allowed it to seek reimbursement from the manufacturer of the car for the amount it had paid out to John.
The insurance company sued XYZ Motors for the amount it had paid to John, arguing that the defect in the braking system was due to the negligence of XYZ Motors. In this case, the principle of subrogation enabled the insurance company to pursue the manufacturer for damages, based on the manufacturer's liability for the defective product.
This is an example of how the subrogation principle under product liability insurance, can be used in a unique way to cover liability insurance. It enables to hold manufacturers accountable for the quality of their products, while also protecting consumers from the financial consequences of product defects.
Conclusion
The principle of subrogation in product liability insurance refers to the right of the insurer to pursue recovery from a third party that may have caused the loss. This means that if the insured has suffered a loss due to a defective product, and the insurer pays out a claim to the insured, the insurer may then pursue the manufacturer or other responsible party to recover the amount paid out.
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