SUBROGATION Flashcards
What is subrogation in insurance terms?
The right of an Insurer to step into the shoes of a PH & pursue an action in the name of the PH to recover their loss against a third party who may be responsible for the loss.
Definition of subrogation?
CASTELLIAN V PRESTON (1883) - underwriter is entitled to take the advantage of every right of the assured
Insurers rights to subrogation arise as to the natural consequence of the indemnity principle by?
- Preventing Insured from making a double recovery by commencing proceedings against third party having already been indemnified
- To prevent third party avoiding liability
Rights of subrogation will only accrue if the following 2 conditions precedent are satisfied;
- Existence of a contract of indemnity
- Payment of indemnity
- In full indemnity
- Where sum paid by Insurer is less than loss suffered by Insured, Insureds rights don’t pass to the Insurer
Subrogation conditions?
There can be a condition within the policy that allows insurers to exercise it’s rights of subrogation before any payment is made
Mark Rowlands Ltd v Berni Inns Ltd (1986)?
- Referred to as Rowlands Principle.
- Landlord & tenant
- Lease states landlord responsible for repair, tenant pays towards premium and relieved of repairing obligations
- Fire, negligently by tenant
- Landlord Insurer sought recovery
- Denied, due to mutual benefit to landlord & tenant, landlord to repair, tenant pays towards premium and relieved of repairing obligations.
What’s an exclusion of subrogation?
- Pre-existing agreement between Insured & third party that they will not bring a claim against third party means Insurer can’t.
- Mark Rowlands Ltd v Berni Inns Ltd (1986)
Why is it important to report to Insurers about a potential subrogration recovery?
- Can affect overall costs for Insurers if values of recovery not taken into account
- Leads to insufficient tax being paid.
Why is it essential that the PH understands subrogation in the claim?
- Only one legal action can be brought against the third party. (maximise recovery, insurer only on for insured losses, therefore need to communicate).
- Collection and retention of evidence. - Must be kept and advice should be provided to PH at the initial stages.
Who is likely to pick up the costs of recovery in a domestic situation?
Reasonable to presume the Insurer will
Who is likely to pick up the costs of recovery in a commercial situation?
Depends on the deductible, this may be shared between Insurer and PH.
What can evidence include?
- Eye-witness reports
- Photographs of extent of damage
- Forensic scientist reports (non-bias)
- Detailed assessments of reinstatement works
- Pre-loss photographs
Pursuing the recovery?
- Should run parallel with claim
- Make contact w relevant parties
- Work with 3rd party liability Insurer to avoid conflict & make recovery successful
- Be proactive, Limitation Act 1980.
What happens when a full recovery isn’t possible?
- Insured gets full recover of losses first
- Pay up, recover down.
- However, last thing to be given is the excess to insured
Lord Napier & Ettrick v Hunter (1993)
