Subrogation Flashcards
What is the term Subrogation?
The substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties.
What are the Principles of Subrogation?
It allows an insurer who has indemnified an insured for a loss to take over the insured’s legal rights to recover from a negligent third-party responsible for the loss.
This is to prevent the insured from getting more than indemnity when he has two or more avenues to recover from the loss.
This principle does not apply to personal accidents or life insurances as these are not policies of indemnity.
How may Subrogation arise?
The Subrogation rights exist in common law, this allows the insurer to commence a recovery action before it pays a claim giving the insurer more control over proceedings and a better chance of making a recovery.
This may arise under contracts, for example:
A businessman loses money during transit and may decide to claim against his insurance company. The insurer will be entitled to subrogation rights to recover the same loss from the security firm under contract with the business owner.
In an event of a total loss and upon claim settlement, the insurer is entitled to exercise subrogation rights by taking possession of the wreck or salvage in order to recover some amount of the total loss paid.
