Question

Joe received payment from his title insurance company to compensate him for a defect in his title. Subsequently he was awarded a judgment against the seller, and collected the funds from the seller, to compensate him for the same defect. The title company has claimed the right to a refund from Joe. What clause in the title policy allows the title company to make this claim?

Answer 1

Answer:

subrogation clause

Explanation:

The subrogation clause establishes an insurance company's rights to collect the money it paid for an event relating to an insurance contract from the individual or business that was responsible for the event which resulted in  loss, injury or damage to the insured.

In this case, Joe's title company has the right to collect the funds from the seller since it already paid a compensation to Joe. The whole purpose of having insurance is that your financial position is not affected by an unexpected event, but it is not meant to provide a profit for the insured.