When is subrogation most commonly exercised by insurance companies?

Subrogation is a process that allows an insurance company to pursue a third party that caused an insurance loss to the insured. This typically occurs after the insurer has paid a claim to the insured. The purpose of subrogation is to enable the insurance company to recover the amount it has paid out for the claim from the responsible party.

When a claim is settled, the insurer takes on the rights of the insured against the third party that caused the loss. This means that the insurer can step into the shoes of the insured to recover costs that may be owed from that third party. This process not only helps the insurer regain some of its losses but also helps keep insurance premiums lower for policyholders since the insurer can recoup funds from responsible parties.

In contrast, the other scenarios presented do not typically trigger the process of subrogation. For instance, filing for bankruptcy does not inherently involve a third-party claim for damages. Paying out-of-pocket expenses or a total loss situation may influence the insured's financial burden but do not initiate the subrogation process unless there’s a third party to pursue after a claim has been paid. Thus, the most common situation in which subrogation is exercised is indeed after the insurer has settled a claim with the insured