Idaho Property and Casualty Practice Exam 2025 - Free Practice Questions and Study Guide

The correct answer is subrogation. Subrogation is a legal process that allows an insurance company to pursue a third party that caused an insurance loss to recover the amount of the claim paid to the insured. In the context of the scenario, when X's company pays for the damages caused by fireworks, it may then seek reimbursement from the party responsible for those damages. This process not only protects the financial interests of the insurance company but also helps to hold the wrongdoer accountable for their actions.

In related terms, reimbursement refers to the act of repaying an amount previously expended, but it does not capture the proactive element of seeking out the responsible party. Appraisal typically involves resolving disputes over the value of the loss covered under a policy, focusing on determining the worth of the claim rather than pursuing a third party. Loss settlement is a broader term that refers to how claims are settled but does not specifically highlight the recovery process from a liable third party. Subrogation distinctly identifies that pursuit of responsible parties, making it the most accurate choice in this situation.