Chapter 10 - subrogation and contribution Flashcards
Are there subrogation rights outside of indemnity polices
No - indemnity policies only
When can you recover from the same loss twice?
When given as a ‘gift’
When do subrogation rights arise in common law
Insurers must pay the claim before they can exercise subrogation rights
Sources of subrogation rights
Tort
Contract
Statute
Why do subrogation rights differ in salvage abandonment cases vs normal cases
Only confers rights over to the insurer, whereas normal loses give you right to claim against the third party
Subrogation here cannot be in insurers’ own name
Insurer can make a profit
Abandoned property need not be accepted by the insurer
How are subrogation rights affected by market agreements
They can be waived - if they was not one insurer would claim from another and is an administrative burden
Market agreements - can insurers pursue rights of recovers against persons who negligently injure their fellow employees
No
How has market agreements affected contribution
Ratio of contribution can be based on market practice rather than established rules
Insurers may agree to share losses so, strictly speaking, contribution does not arise
Insurers may waive rights of contribution where the rights do exist, so one insurer holds whole claim
When can the insurer claim contribution from other insurers
Once the claim is paid in full
Contribution conditions - ‘more specific insurance’
Where the loss is covered by a more specific insurance, the policy will respond only when the cover provided by the more specific insurance is exhausted
Maximum liability method
Under the maximum liability method the loss is shared by the insurers in proportion to the maximum amount of cover that is available under each policy which, in the case of property insurance, is usually equivalent to the sum insured
o Normally used in the case of property policies that are not subject to average and in which the subject matter of insurance (property) is identical, the maximum liability method is normally used
o Whereas the independent liability method is normally used in liability insurance
An insurer has paid a policyholder for fire damage to his home caused by an electricians faulty work, less the policy excess. How should any subrogation action for damages be brought against the negligent electrician and for what amounts
By the insurer in the name of the insured for the amount of the claim payment and the policy excess
The maximum liability method of calculating contribution operates, but with unfair results, if only one of the relevant policies …
is subject to a policy excess.
Two property insurance policies cover the same loss but the policy terms and conditions differ. Following a claim, which method of calculating contribution is most likely to be used?
The independent liability method.
Following the case of Lister v. Romford Ice and Cold Storage Ltd (1957), insurers generally agreed to
give up their subrogation rights against workers who negligently injure their fellow employees in the course of employment.
The operation of the principle of subrogation, and the way in which any recovery from a third party is shared between the policyholder and the insurers, depends on
o the amount of the recovery in relation to the loss
o whether the insurance covers the loss in full
What impact would an ‘escape’ clause have on the insured?
It prohibits the insured from having another insurance policy without the agreement of the first insurer.
It is usual for an insurer to insert a subrogation waiver clause into a contract to agree with a policyholder that the insurer will NOT exercise subrogation rights against subsidiary companies of the policyholder. True?
Yes
