Subrogation Flashcards
What is subrogation?
Common law right - the right of an insurer, following payment of a claim, to take over the customer’s rights to recover payment from a third party
What is the leading case regarding subrogation?
Castellain v Preston - tried to sell house when it was damaged by a fire
What condition do insurers generally include in their policies when it comes to subrogation?
A condition which allows them to pursue subrogation rights before the claim is paid (general rule is that an insurer can only pursue subrogation rights after the claim is paid which causes problems in terms of delays etc)
The insured cannot claim an indemnity payment from the insurer and then acquire a further payment from a third party - true or false?
True - this would result in profit for the insured and breach the principle of indemnity
Insurers are not entitle to recover more than they’ve paid out on a claim, which case highlighted this?
Yorkshire Insurance co v. Nisbet Shipping
What 3 ways can subrogation rights arise?
Tort - under common law everyone has a duty to act reasonably towards others, if you breach this duty it’s classed as a tort (i.e. is someone had wronged your property the insurer is entitle to recover on your behalf)
Contract - under certain contracts a breach entitles the effected party to compensation regardless of fault so insurers can assume rights of recovery
Statute - most insurers require that claims for riot, civil commotion and malicious damage must be notified within 7 days of the event, this is because under the terms of the Riot Regulations Act insurers have a set time frame in which they can recover against the police for damage (42 days)
Why do market agreements around subrogation exist?
To reduce the amount of correspondence/administrative costs around frequent subrogation procedures
Market agreement - the ABI memorandum of understanding (subrogated motor claims)
Sets out principles for subrogated motor claims based on “honesty and transparency” and is not a legally binding agreement
Market agreement - immobile property agreement
Agreement isn’t really in force anymore, however, in the past it was an agreement between property and motor insurers which dealt with impact damage by motor vehicles (if a vehicle collided with a building the agreement was that each insurer would contribute towards the loss in the proportions already agreed)
Situations when insurers can’t exercise subrogation rights;
Insured has no rights - if customer has waivered their rights the insurer cannot re-aquire them (common in hold harmless clauses)
Benefit policies - as benefit policies are not polciies of indemnity they are not subject to the same rules, even if someone negligently injurs insured the insurer does not have rights to recovery (even if the insured successfully sues the negligent person they are entitle to keep both the insurance payment and the court award)
Subrogation waiver - circumstances where the insurer agrees to give up their rights of subrogation (common in commercial insurances)
Negligent fellow employees - after the case of Lister v Romford Ice and Cold Storage insurers took the decesion to not pursue recovery rights against negligent fellow workers (seen as harsh as people involved in the claim know each other so can make things awkward, in the case it was a father and son)
Which case determined that insurers would not use their subrigation rights against negligent fellow workers?
Lister v Romford Ice and Cold Storage - father and son
