2 Subrogation
2.1 Subrogation and Indemnity
The notion of subrogation at Roman law is construed as the replacement of the
actions of one official by those of another. In other words, it is the substitution of one
party by another.
8 The corresponding common law equivalent is that the insurer pays
the debt of the assured who then surrenders his rights in favour of the insurer. Thus,
by subrogation, the insurer acquires all the rights, claims and defences of the assured,
in other words, just about anything. This was confirmed in North of England Iron
S.S. Insurance Association v. Armstrong
9 where the court referred to “[T]he right of
an insurance company to collect literally anything the insured could have recovered
. . .”. It is said that “the general purpose of subrogation is to facilitate placement of
the financial consequences of loss on a party primarily responsible in law for such
loss”.
10 Subrogation is justifiable on the basis that it seeks to ensure that liability
rests on the party that is most appropriate for bearing it. Undoubtedly, that is the
perpetrator or wrongdoer responsible for the loss as opposed to the insurer whose
liability is only secondary.
As is well articulated by Professor Rose:
The underlying purpose of a contract of indemnity insurance is the provision of an agreed
indemnity to an assured for a loss. The “doctrine of subrogation” is often used to describe a
series of related principles which can be best understood as having two major functions. The
first is to prevent the assured from being over-indemnified under the contract of insurance for
the loss insured against, at the expense of the insurer. The second is to facilitate recoupment
of the insurer for the indemnity paid to the assured – often though not invariably, at the
expense of the party responsible for causing the loss.
11
Subrogation is provided for in the Marine Insurance Act, 1906
12 in section 79 as
follows:
1. Where the insurer pays for a total loss, either of the whole, or in the case of goods
of any apportionable part, of the subject matter insured, he thereupon becomes
entitled to take over the interest of the assured in whatever may remain of the
subject-matter so paid for, and he is thereby subrogated to all the rights and
remedies of the assured in and in respect of that subject-matter as from the time of
the casualty causing the loss.
2. Subject to the foregoing provisions, where the insurer pays for a partial loss, he
acquires no title to the subject-matter insured, or such part of it as may remain, but
is thereupon subrogated to all rights and remedies of the assured in and in respect
8 See Bybee (1979), p. 154.
9 (1870), L.R. 5 Q.B. 244.
10 Horn (1964), p. 24.
11 Rose (2012), p. 561.
12 6 Edw 7 c 41.
Windfall in the Law of Subrogation: Marine Insurance in Motion
565
2.1 Subrogation and Indemnity
The notion of subrogation at Roman law is construed as the replacement of the
actions of one official by those of another. In other words, it is the substitution of one
party by another.
8 The corresponding common law equivalent is that the insurer pays
the debt of the assured who then surrenders his rights in favour of the insurer. Thus,
by subrogation, the insurer acquires all the rights, claims and defences of the assured,
in other words, just about anything. This was confirmed in North of England Iron
S.S. Insurance Association v. Armstrong
9 where the court referred to “[T]he right of
an insurance company to collect literally anything the insured could have recovered
. . .”. It is said that “the general purpose of subrogation is to facilitate placement of
the financial consequences of loss on a party primarily responsible in law for such
loss”.
10 Subrogation is justifiable on the basis that it seeks to ensure that liability
rests on the party that is most appropriate for bearing it. Undoubtedly, that is the
perpetrator or wrongdoer responsible for the loss as opposed to the insurer whose
liability is only secondary.
As is well articulated by Professor Rose:
The underlying purpose of a contract of indemnity insurance is the provision of an agreed
indemnity to an assured for a loss. The “doctrine of subrogation” is often used to describe a
series of related principles which can be best understood as having two major functions. The
first is to prevent the assured from being over-indemnified under the contract of insurance for
the loss insured against, at the expense of the insurer. The second is to facilitate recoupment
of the insurer for the indemnity paid to the assured – often though not invariably, at the
expense of the party responsible for causing the loss.
11
Subrogation is provided for in the Marine Insurance Act, 1906
12 in section 79 as
follows:
1. Where the insurer pays for a total loss, either of the whole, or in the case of goods
of any apportionable part, of the subject matter insured, he thereupon becomes
entitled to take over the interest of the assured in whatever may remain of the
subject-matter so paid for, and he is thereby subrogated to all the rights and
remedies of the assured in and in respect of that subject-matter as from the time of
the casualty causing the loss.
2. Subject to the foregoing provisions, where the insurer pays for a partial loss, he
acquires no title to the subject-matter insured, or such part of it as may remain, but
is thereupon subrogated to all rights and remedies of the assured in and in respect
8 See Bybee (1979), p. 154.
9 (1870), L.R. 5 Q.B. 244.
10 Horn (1964), p. 24.
11 Rose (2012), p. 561.
12 6 Edw 7 c 41.
Windfall in the Law of Subrogation: Marine Insurance in Motion
565