Which component allows the insurer to recover costs from a negligent third party after a covered loss?

• A. Subrogation against negligent third-parties
• B. Inspections of workplaces
• C. Cancel policy
• D. Audit payroll

Answer: (A)

Subrogation lets the insurer recover costs from the negligent third party after benefits have been paid. Once the insurer covers workers’ compensation benefits or employer liability losses, it gains the right to step into the insured’s position and pursue the party at fault to recoup those payments. This mechanism shifts the financial burden back to the party responsible, helping to keep insurance costs down for the employer and promoting accountability. The other options serve different purposes—inspections are about safety and compliance, cancelling the policy ends coverage, and payroll audits determine premium levels—not recovering losses from third parties.