assured recovers from a third party before the insurer has paid, any sum greater than
the loss, he cannot recover anything from the insurer anyway because he has not
suffered any loss, but there is nothing to suggest that the insurer can recover from the
assured, the excess amount. He then went on to say:
In my view, the doctrine of subrogation in insurance law requires one to imply in contracts of
marine insurance only such terms as are necessary to ensure that notwithstanding that the
insurer has made a payment under the policy, the assured shall not be entitled to retain, as
against the insurer, a greater sum than what is ultimately shown to be his actual loss.
28
Further on in his judgment Diplock J. opined that the matter turned on the
meaning of “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” in
s. 79(1) of the Marine Insurance Act 1906, and in elaborating on what he perceived
to be the natural meaning of those words, he remarked that “. . .the insurer’s rights
. . . are limited to recovering any sum which he has overpaid; he cannot recover more
than he has in fact paid;”
29 and if there is any proposition that “an insurer can recover
from an assured by way of subrogation a sum greater than he has paid, it is in my
view inconsistent with the reasoning of the Court of Appeal in Castellain v. Preston
and Others.”
30 The court held in finality that the assured was entitled to the benefit of
the windfall and in reaching that decision, Diplock J. referred to the much older case
of King v. Victoria Insurance Co.
31
In bringing to closure the discussion on this case, and risking reiteration, it is to be
stressed that Diplock J. held the insurer to be disentitled to any sums more than what
he had paid under the policy. The profit in this case was not made at the expense of
the insurer but resulted from extraneous circumstances.
32
3.2 American Cases
In subrogation law, two alternative scenarios can arise in the context of windfall.
One, as illustrated in the case of Yorkshire Insurance v. Nisbett, is where the insurer
has fully indemnified the assured in the event of his ship suffering a mishap resulting
in a loss. If damages are recovered from the tortfeasor, the assured gets to keep the
windfall. The other scenario is where the assured has not received the equivalent of
the actual value of the ship from the insurer even though the latter has paid the
amount equivalent to his full commitment under a valued policy. The assured sues
the tortfeasor and recovers damages which arguably represents a windfall. The
28 Ibid at p. 483.
29 Ibid at p. 484.
30 Ibid. at p. 485.
31 [1896] A.C. 250.
32 See Gaskell et al. (1987)), pp. 520–521.
Windfall in the Law of Subrogation: Marine Insurance in Motion
571
the loss, he cannot recover anything from the insurer anyway because he has not
suffered any loss, but there is nothing to suggest that the insurer can recover from the
assured, the excess amount. He then went on to say:
In my view, the doctrine of subrogation in insurance law requires one to imply in contracts of
marine insurance only such terms as are necessary to ensure that notwithstanding that the
insurer has made a payment under the policy, the assured shall not be entitled to retain, as
against the insurer, a greater sum than what is ultimately shown to be his actual loss.
28
Further on in his judgment Diplock J. opined that the matter turned on the
meaning of “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” in
s. 79(1) of the Marine Insurance Act 1906, and in elaborating on what he perceived
to be the natural meaning of those words, he remarked that “. . .the insurer’s rights
. . . are limited to recovering any sum which he has overpaid; he cannot recover more
than he has in fact paid;”
29 and if there is any proposition that “an insurer can recover
from an assured by way of subrogation a sum greater than he has paid, it is in my
view inconsistent with the reasoning of the Court of Appeal in Castellain v. Preston
and Others.”
30 The court held in finality that the assured was entitled to the benefit of
the windfall and in reaching that decision, Diplock J. referred to the much older case
of King v. Victoria Insurance Co.
31
In bringing to closure the discussion on this case, and risking reiteration, it is to be
stressed that Diplock J. held the insurer to be disentitled to any sums more than what
he had paid under the policy. The profit in this case was not made at the expense of
the insurer but resulted from extraneous circumstances.
32
3.2 American Cases
In subrogation law, two alternative scenarios can arise in the context of windfall.
One, as illustrated in the case of Yorkshire Insurance v. Nisbett, is where the insurer
has fully indemnified the assured in the event of his ship suffering a mishap resulting
in a loss. If damages are recovered from the tortfeasor, the assured gets to keep the
windfall. The other scenario is where the assured has not received the equivalent of
the actual value of the ship from the insurer even though the latter has paid the
amount equivalent to his full commitment under a valued policy. The assured sues
the tortfeasor and recovers damages which arguably represents a windfall. The
28 Ibid at p. 483.
29 Ibid at p. 484.
30 Ibid. at p. 485.
31 [1896] A.C. 250.
32 See Gaskell et al. (1987)), pp. 520–521.
Windfall in the Law of Subrogation: Marine Insurance in Motion
571