of the subject-matter insured as from the time of the casualty causing the loss, in
so far as the assured has been indemnified, according to this Act, by such payment
for the loss.
In Castellain v. Preston,
13 Brett L.J. referred to the doctrine of subrogation as a
“fundamental rule of insurance law”, and held that “... as between the underwriter
and the assured the underwriter is entitled to the advantage of every right of the
assured, whether such right consists in contract, fulfilled, or unfulfilled or in remedy
for tort . . . or in any other right, whether by way of condition or otherwise, legal or
equitable. . .”.
14 The expansive nature of this statement is reflected in the words
“every right” in respect of contract and “any other right” in respect of tort; and
further, whether the right is legal or equitable, or is by way of condition or otherwise.
A further paraphrasing of the dictum of the learned judge leads to the conclusion that
it is of no consequence whether the right has been already exercised or it has simply
accrued, and regardless of whether it could be enforced by the insurer, so long as the
insured loss is diminished. The very categorical nature of the statement renders the
right of subrogation of the insurer as absolute as can be imagined, seemingly leaving
no room for any exception. It is of virtually watertight consistency with the underlying rationale for the rule of indemnity. Whether that is ideal will be explored later
in the chapter.
2.1.1 Subrogation, Restitution and Unjust Enrichment
In the event of a shipowner suffering a loss, he would be entitled to bring suit against
the person who caused the loss and recover damages. If the subject-matter of the
loss, namely the ship, was insured, and the loss he suffered was attributable to an
insured peril, he would be entitled to be indemnified by the insurer under his
insurance contract. Pursuant to the doctrine of subrogation, the insurer, after paying
the assured, would then have a right of action against the perpetrator who caused the
loss or damage. If the assured shipowner is able to recover damages from the
perpetrator and also receives indemnification from his insure, he would be obtaining
double recovery for a single loss. In other words, he would be unjustly enriched at
the expense of the insurer. The object of the law is to prevent that from happening.
Subrogation is in effect a restitutionary measure designed to prevent unjust enrichment.
15 Thus, any proposition providing the assured recompense beyond a full
indemnity, would be manifestly wrong.
16
The insurer’s right of subrogation is closely associated with his right of recoupment. The latter will arise when the assured obtains double recovery for his loss; one
13 Supra, note 4.
14 Ibid. at p. 388.
15 Bybee (1979), pp. 146–147.
16 Supra, note 4 at p. 386.
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P. K. Mukherjee
so far as the assured has been indemnified, according to this Act, by such payment
for the loss.
In Castellain v. Preston,
13 Brett L.J. referred to the doctrine of subrogation as a
“fundamental rule of insurance law”, and held that “... as between the underwriter
and the assured the underwriter is entitled to the advantage of every right of the
assured, whether such right consists in contract, fulfilled, or unfulfilled or in remedy
for tort . . . or in any other right, whether by way of condition or otherwise, legal or
equitable. . .”.
14 The expansive nature of this statement is reflected in the words
“every right” in respect of contract and “any other right” in respect of tort; and
further, whether the right is legal or equitable, or is by way of condition or otherwise.
A further paraphrasing of the dictum of the learned judge leads to the conclusion that
it is of no consequence whether the right has been already exercised or it has simply
accrued, and regardless of whether it could be enforced by the insurer, so long as the
insured loss is diminished. The very categorical nature of the statement renders the
right of subrogation of the insurer as absolute as can be imagined, seemingly leaving
no room for any exception. It is of virtually watertight consistency with the underlying rationale for the rule of indemnity. Whether that is ideal will be explored later
in the chapter.
2.1.1 Subrogation, Restitution and Unjust Enrichment
In the event of a shipowner suffering a loss, he would be entitled to bring suit against
the person who caused the loss and recover damages. If the subject-matter of the
loss, namely the ship, was insured, and the loss he suffered was attributable to an
insured peril, he would be entitled to be indemnified by the insurer under his
insurance contract. Pursuant to the doctrine of subrogation, the insurer, after paying
the assured, would then have a right of action against the perpetrator who caused the
loss or damage. If the assured shipowner is able to recover damages from the
perpetrator and also receives indemnification from his insure, he would be obtaining
double recovery for a single loss. In other words, he would be unjustly enriched at
the expense of the insurer. The object of the law is to prevent that from happening.
Subrogation is in effect a restitutionary measure designed to prevent unjust enrichment.
15 Thus, any proposition providing the assured recompense beyond a full
indemnity, would be manifestly wrong.
16
The insurer’s right of subrogation is closely associated with his right of recoupment. The latter will arise when the assured obtains double recovery for his loss; one
13 Supra, note 4.
14 Ibid. at p. 388.
15 Bybee (1979), pp. 146–147.
16 Supra, note 4 at p. 386.
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P. K. Mukherjee