2.1.3 Subrogation and Abandonment
In virtue of subrogation, the insurer, after indemnifying the assured under the policy,
acquires the rights and remedies of the assured in the subject-matter of the insurance.
The entitlement of the assured to those rights and remedies are independent of
ownership or proprietary interest in relation to the insured property. By contrast,
abandonment, which occurs only as a consequence of a constructive total loss of the
insured property, bestows on the insurer, ownership of the insured property giving
him all the rights and remedies associated with ownership.
18 The doctrine of
abandonment operates on a different legal basis and is peculiar to the law of marine
insurance.
19 To put it succinctly and in proper perspective, subrogation confers only
a right of action whereas abandonment results in ownership. The concepts are related
but are distinctively different as illustrated by the House of Lords’ decision in the
Glen Line case
20 There are several other decided cases on this topic.
3 Windfall
3.1 English Case Law
In the context of the present discussion, the position of English law regarding the
doctrine of subrogation is provided explicitly in the Marine Insurance Act 1906 and
explained adequately through scholarly works including leading text books and
published articles. But the related phenomenon of windfall is not expressly
addressed in the legislation; nor is there a huge amount of academic discussion.
Furthermore, the case law is rather sparse, consisting of a singular elaborate and
comprehensive case in the English jurisdiction which is discussed below following
an analytical examination of an earlier decision which focuses on the correlation and
interaction between subrogation and abandonment and is tangentially relevant to
windfall.
In the case of Attorney General v. Glen Line Ltd. and the Liverpool & London
War Risks Insurance Association, Ltd.
21 insurers paid for a total loss in respect of the
ship Glenearn captured in Hamburg when World War I broke out. The owners
abandoned the ship in favour of the underwriters. At the end of the war, the ship was
returned to the owners who sold it and accounted to the insurers for the sale proceeds
which were three times higher than what the underwriters had paid by way of
indemnification under the insurance policies. Subsequently, the German authorities
paid a large amount of compensation to the former owners in respect of damage and
18 Khurram (1994), p. 115.
19 See Marine Insurance Act 1906, sections 60-63.
20 infra, note 21.
21 (1930), 37 Ll. L. R. 55 (HL).
568
P. K. Mukherjee
In virtue of subrogation, the insurer, after indemnifying the assured under the policy,
acquires the rights and remedies of the assured in the subject-matter of the insurance.
The entitlement of the assured to those rights and remedies are independent of
ownership or proprietary interest in relation to the insured property. By contrast,
abandonment, which occurs only as a consequence of a constructive total loss of the
insured property, bestows on the insurer, ownership of the insured property giving
him all the rights and remedies associated with ownership.
18 The doctrine of
abandonment operates on a different legal basis and is peculiar to the law of marine
insurance.
19 To put it succinctly and in proper perspective, subrogation confers only
a right of action whereas abandonment results in ownership. The concepts are related
but are distinctively different as illustrated by the House of Lords’ decision in the
Glen Line case
20 There are several other decided cases on this topic.
3 Windfall
3.1 English Case Law
In the context of the present discussion, the position of English law regarding the
doctrine of subrogation is provided explicitly in the Marine Insurance Act 1906 and
explained adequately through scholarly works including leading text books and
published articles. But the related phenomenon of windfall is not expressly
addressed in the legislation; nor is there a huge amount of academic discussion.
Furthermore, the case law is rather sparse, consisting of a singular elaborate and
comprehensive case in the English jurisdiction which is discussed below following
an analytical examination of an earlier decision which focuses on the correlation and
interaction between subrogation and abandonment and is tangentially relevant to
windfall.
In the case of Attorney General v. Glen Line Ltd. and the Liverpool & London
War Risks Insurance Association, Ltd.
21 insurers paid for a total loss in respect of the
ship Glenearn captured in Hamburg when World War I broke out. The owners
abandoned the ship in favour of the underwriters. At the end of the war, the ship was
returned to the owners who sold it and accounted to the insurers for the sale proceeds
which were three times higher than what the underwriters had paid by way of
indemnification under the insurance policies. Subsequently, the German authorities
paid a large amount of compensation to the former owners in respect of damage and
18 Khurram (1994), p. 115.
19 See Marine Insurance Act 1906, sections 60-63.
20 infra, note 21.
21 (1930), 37 Ll. L. R. 55 (HL).
568
P. K. Mukherjee