Main purpose of subrogation
Prevent double indemnity
What type of policies does subrogation occur in
Indemnity only
What is unconscionable conduct?
When the insured gets double recovery and didn’t pay insurer back
What can courts do for unconscionable conduct?
Insurers have enforceable equitable lien and can secure injunction compelling policy holder to give money
When can insurer claim subrogation?
Only after the claim has been paid to the insured
Gifts / voluntary payemtns
Cannot be claimed under subrogation
Actions in the name of the insured
- Must be brought in the name of the insured
- If assured does not let insurer use their name then insurer can sue both assured and 3rd party in same action
One action only for the whole loss
It must be for the whole loss not a portion which has been borne by the insurers
what is duty of assured clause
Requires insured to preserve the insurers subrogation rights
Subrogation recovery greater than loss
Insurer entitled to keep it
How can insurers recover greater than the loss / Nisbet Principle
Via abandonment and salvage. By way of subrogation they can never recover more than they have paid out
Recovery less than loss
May happen when 3rd party becomes insolvent or unable to pay
Due to there being a policy excess
What can the insured deduct from insurer
Legal costs or expenses incurred in attempting to recover loss from insured
Ex gratia payments
Payments made as a favour and out of the policy terms
Sources of subrogation (3)
- Tort- (mainly negiligence)
- Contract - (hold harmless clause: used as a release of liability in contract that protects one party) - common in construction, engineering
- Statute - Right belonging to the insured (Riots compensation act 2016)
Differences between subrogation, abandonment and salvage
- Subro gives insurer right to claim against 3rd party, abandonment and salvage = confer rights of subject matter
- Subro cannot be brought by insurer’s name, insurer who accets abandonment = owner
- Insurer can make profit from abandoned property, subro = no greater recovery
- subro operates auotmatically
Denial of subro rights
- Market agreements
2.Contractual waiver of subro - people associated with assured - Co-insurance
Double insurance and contribution
Sharing the loss between insurers so the insured can’t claim double
Double insurance motives
Fraud, unintentional, policies overlap
Common law rules of contribution (5)
- Each policy liable for loss
- Insurers have same interest in subject matter
- 2+ policies of indemnity must exist
- insures the subject matter of the loss
- Insures the peril that causes loss
Maximum liability method
Loss is shared by insurers in proportion to max cover that is available
work % split then x by loss
