What is subrogation in the context of title insurance?

Subrogation in the context of title insurance refers to the legal right of the title insurer to step into the shoes of the insured after they have made a claim. This means that once the insurer has compensated the insured for their loss due to a defect in the title, they acquire the right to pursue any potential recovery from parties responsible for that defect. This process enables the insurer to seek reimbursement for the amount paid out, thereby limiting their losses.

The option highlighting subrogation as a form of legal protection for defending a claim against the title underscores its role in ensuring that both the insured and the insurer are legally safeguarded. It allows the insurer to recoup some of the costs associated with claims arising from defects in the title that were not disclosed at the time the insurance was issued.

In contrast, the other options do not accurately reflect the function of subrogation. For instance, creating a new title is unrelated to subrogation, which deals with claims and recovery rather than title creation. The transfer of ownership rights generally refers to the conveyance of property rather than the rights or actions of an insurer after a claim. Lastly, the cancellation of a title insurance policy is an entirely different concept and does not involve the transfer of rights or compensation recovery