What term refers to the rights assigned to an insurance company to sue the party responsible for the damage after paying the insured?

The correct choice is the term that reflects the insurance company’s right to pursue a third party for compensation after it has paid out a claim to the insured. This principle is known as subrogation. When an insurer pays a claim to the policyholder for damages caused by another party, subrogation allows the insurer to "step into the shoes" of the insured to recover the amounts paid from the party that caused the loss.

Subrogation is an essential part of the insurance process as it helps to maintain the balance in the insurance system by preventing the insured from receiving a monetary windfall (being compensated twice) and allows the insurer to recoup its costs. This process ultimately helps to keep premiums lower for policyholders.

The other terms listed have different meanings. An arbitration clause typically refers to a provision in a contract that requires disputes to be resolved through arbitration rather than through the court system. A deductible is the amount the insured must pay out of pocket before the insurance coverage kicks in. Indemnity refers to the principle that the insured should be restored to the financial position they were in before the loss, without profiting from the insurance coverage. Each of these terms plays a role in the broader context of insurance agreements but does not specifically describe the