12: Subrogation and contribution

Question 1

What is subrogation?

Answer 1

The right of one person, having indemnified another under a legal obligation to do so…

…to stand in the place of that other and avail themselves of all the rights and remedies of that other, whether already enforced or not.

Question 2

North British and Mercantile Insurance Co. v. London, Liverpool and Globe Insurance Co. (1877)
(Common Interest, Contribution)

Answer 2

• merchants (Rodocanachi) had deposited grain their grain at a granary owned by wharfingers (Barnett)

-Wharfingers had insured the grain
- Merchants had insured their grain as well
Wharfingers insurers paid a claim following fire damage. Tried to claim off of Merchants insurers. Failed as the interests were different.

Question 3

What is contribution?

Answer 3

The right of an insurer to call upon others similarly…

… but not necessarily equally liable to the same insured…

…to share the cost of an indemnity payment.

Question 4

Napier v. Hunter (1993)

first subrogation case, Nature of Subrogation

Answer 4

supplemented by common law, which implies 4 terms into insurance contracts:

• a duty on the part of the insured to start proceedings against a third party (to reduce loss).
• insured promises to account to insurers for money received from third party.
• insured promises to permit insurer to exercise right of action against third party (should the insured fail).
• insured promise to act in good faith when proceeding against third party.

Question 5

Castellain v. Preston (1883)

Insured recovers for the same loss twice, Operation of Subrogation

Answer 5

• seller of house recovers £330 from his insurer due to fire damage to property (happened between signing of the contract and the completion of the sale).
• buyer completed purchase at full price (£3,100) despite fire.
• seller owed insurer £330 received from the buyer otherwise he would have ‘made a profit for his loss’.