West Virginia Property and Casualty Licensing Practice Exam 2025 – Your Complete All-in-One Study Guide for Exam Success!

Subrogation occurs when an insurer steps into the shoes of the insured after paying a claim and seeks recovery of that amount from a third party responsible for the damages. In this case, if an insured collects from their insurance for damages caused by a third party, the insurer can pursue subrogation to recover the amount it paid out to the insured. This mechanism allows the insurer to transfer the right of recovery to itself, ensuring that the financial responsibility ultimately falls on the party at fault, rather than the insurer or the insured.

The other circumstances provided in the options do not typically involve the concept of subrogation. For instance, making a false claim does not relate to the right of recovery or transferring claims. Similarly, if an insurer pays out before an investigation, it may indicate an expedited or unverified claim but does not trigger subrogation. Lastly, when an insured refuses to settle a claim, it pertains more to the negotiation and settlement process rather than the recovery of costs from a third party. Thus, the correct scenario for subrogation is when an insured collects from their insurance for damages caused by a third party.