Subrogation is the insurer's right, after paying a claim, to pursue recovery from third parties legally responsible for causing the loss. This equitable principle allows the insurer to "step into the shoes" of the insured and exercise the insured's rights of action against the responsible party. For example, if a subcontractor's negligence causes property damage, the insurer may pay the insured's claim and then pursue the subcontractor for reimbursement. The insured must not prejudice or waive the insurer's subrogation rights without prior consent, such as by releasing the third party from liability or entering into hold harmless agreements. Section 67 of the Insurance Contracts Act 1984 (Cth) codifies the insurer's subrogation rights, while Section 54 prevents insurers from denying claims solely due to the insured's breach of subrogation-related policy conditions where the breach did not prejudice the insurer.
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