labour union in relation to which certain vehicles were damaged. The plaintiff
insurance company paid a claim in respect of the damaged vehicles and then brought
an action against the union seeking compensatory and punitive damages. The court
rejected the plea for punitive damages on the basis that subrogation rights only apply
for giving indemnity, and without any further consideration of that proposition in
terms of its justification or origin, rejected the claim.
42
One that addresses the windfall issue more pointedly is another non-shipping
American case, namely, Urban Industries, Inc. and Others v. Thevis.
43 The decision
in that case was comparatively different and one in which the court declined to
follow the rule set in the Carolina Casualty case. The factual situation was that the
defendant hired two individuals to set fire and burn down a building belonging to the
plaintiff who was his competitor. After being indemnified for the loss of its property,
the plaintiff company Urban industries together with four insurance companies
brought proceedings against Thevis. Urban sued for lost profits for which it had
not received any compensation and the insurance companies sued on the basis of
their subrogation rights in respect of the losses of property. Each plaintiff received
judgment comprising compensatory, as well as punitive damages in very large
amounts. Notably, this was a court decision in the state of Kentucky where there
was no policy restricting recovery of damages over and above compensatory damages in respect of a claimant in subrogation.
44
3.3 Critique of the Leading Cases
The outcomes in Yorkshire v. Nisbett and The Livingstone are virtually identical,
namely, that the insurer is precluded from recovering a profit if the assured is
deprived of his indemnity. However, the converse of this proposition is also to be
noted as a verity, that is, that in the instance of a contract of indemnity, any reduction
or diminution of the amount which the indemnifier must pay, or has paid already, if
afterwards “anything which diminishes the loss comes into the hands of the person to
whom he has paid it, it becomes an equity that the person who has already paid the
full indemnity is entitled to be recouped by having that amount back.”
45 It would
seem that the dicta in Yorkshire v. Nisbett and The Livingstone on the one hand, and
the holding in Burnand v. Rodocanachi on the other, are in contradiction in so far as
42 See Bybee (1979), p. 152 where the author remarks that the rule regarding indemnity comes from
cases such as The Livingstone where the assured obtained only partial indemnification from the
insurer.
43 No. C 75-0342 L(A) (WD Ky, (1978).
44 See commentary of the author in Bybee (1979), p. 153.
45 Burnand v. Rodocanachi supra, note 17 at p. 339.
Windfall in the Law of Subrogation: Marine Insurance in Motion
573
insurance company paid a claim in respect of the damaged vehicles and then brought
an action against the union seeking compensatory and punitive damages. The court
rejected the plea for punitive damages on the basis that subrogation rights only apply
for giving indemnity, and without any further consideration of that proposition in
terms of its justification or origin, rejected the claim.
42
One that addresses the windfall issue more pointedly is another non-shipping
American case, namely, Urban Industries, Inc. and Others v. Thevis.
43 The decision
in that case was comparatively different and one in which the court declined to
follow the rule set in the Carolina Casualty case. The factual situation was that the
defendant hired two individuals to set fire and burn down a building belonging to the
plaintiff who was his competitor. After being indemnified for the loss of its property,
the plaintiff company Urban industries together with four insurance companies
brought proceedings against Thevis. Urban sued for lost profits for which it had
not received any compensation and the insurance companies sued on the basis of
their subrogation rights in respect of the losses of property. Each plaintiff received
judgment comprising compensatory, as well as punitive damages in very large
amounts. Notably, this was a court decision in the state of Kentucky where there
was no policy restricting recovery of damages over and above compensatory damages in respect of a claimant in subrogation.
44
3.3 Critique of the Leading Cases
The outcomes in Yorkshire v. Nisbett and The Livingstone are virtually identical,
namely, that the insurer is precluded from recovering a profit if the assured is
deprived of his indemnity. However, the converse of this proposition is also to be
noted as a verity, that is, that in the instance of a contract of indemnity, any reduction
or diminution of the amount which the indemnifier must pay, or has paid already, if
afterwards “anything which diminishes the loss comes into the hands of the person to
whom he has paid it, it becomes an equity that the person who has already paid the
full indemnity is entitled to be recouped by having that amount back.”
45 It would
seem that the dicta in Yorkshire v. Nisbett and The Livingstone on the one hand, and
the holding in Burnand v. Rodocanachi on the other, are in contradiction in so far as
42 See Bybee (1979), p. 152 where the author remarks that the rule regarding indemnity comes from
cases such as The Livingstone where the assured obtained only partial indemnification from the
insurer.
43 No. C 75-0342 L(A) (WD Ky, (1978).
44 See commentary of the author in Bybee (1979), p. 153.
45 Burnand v. Rodocanachi supra, note 17 at p. 339.
Windfall in the Law of Subrogation: Marine Insurance in Motion
573