a windfall of £ 55,000. As rightly pointed out by the commentator mentioned above,
that amount was indubitably excessive being contrary to the basic tenet of subrogation which was created for restitutionary purposes. Indeed, in the later payment made
in 1958, no account was taken of the interest that would have been earned on the £
72,000 paid earlier in 1945. In essence, Yorkshire having paid £ 72,000 in 1945
recovered only the same amount in 1958 without being awarded any interest, which
apparently is the norm in subrogation cases in England. Thus, “Nisbett Shipping was
unjustly enriched at the expense of Yorkshire Insurance”.
51 In the circumstances, the
solution would have been for the Canadian Government to pay the equivalent of £
72,000 so that Yorkshire would have been indemnified without Nisbett making a
windfall profit. But that way, the Canadian Government would have been relieved
from full responsibility for the collision which would be contrary to the inherent
principle of subrogation to make the responsible party liable for its wrongdoing and
the resulting loss.
52
Incidental to the Yorkshire Insurance and Urban Industries cases, and in stark
contrast to them, is the decision in the older English case of Armstrong
53 involving a
valued policy where the value of the insured ship was stated as £ 6000. When the
ship sank, the tortfeasor paid the £ 6000. Later, the assured shipowner was able to
recover £ 9000 which was the actual value of the ship. The court held, in essence,
that if a shipowner chooses to insure his ship at a fixed value rather than leaving the
contract as an ordinary, (unvalued policy), namely, “simply one of indemnity to the
extent of the real value, and if thereby any benefit accrues to the underwriters, the
underwriters must be entitled to it”.
54 The Armstrong case has been approved,
dismissed or distinguished in several English and American cases.
55
Further examination of the grounds which formed the basis for the decisions in
Yorkshire Insurance and the American case Urban Industries reveals other observations and issues which are relevant to this critique. In whose name can the insurer
exercising subrogation rights bring action against the tortfeasor is one issue. Under
English law, it is imperative that the insurer sue in the name of the assured from
whom he has acquired that right. This rule was affirmed in the relatively older case of
Simpson & Co. v. Thomson.
56 If this were not so, insurers would have been able to
recover under rights not derived from subrogation, which could also lead to claimants coming out of the woodworks invoking some kind of proprietary interest in the
ship as the insured property. In other words, virtually “anyone having a relationship
with the assured” could potentially claim that he suffered some kind of damage or
injury.
57 As evident in the American law, by contrast, the subrogated insurer is
51 Ibid.
52 Ibid; see specifically footnote 28 at p. 151.
53 Supra, note, 9.
54 Ibid. at p. 250.
55 See Bybee (1979), footnote 47 at pp. 154–155.
56 (1877), 3 App Cas. 279.
57 See Bybee (1979), footnote 51 at p. 156.
Windfall in the Law of Subrogation: Marine Insurance in Motion
575
that amount was indubitably excessive being contrary to the basic tenet of subrogation which was created for restitutionary purposes. Indeed, in the later payment made
in 1958, no account was taken of the interest that would have been earned on the £
72,000 paid earlier in 1945. In essence, Yorkshire having paid £ 72,000 in 1945
recovered only the same amount in 1958 without being awarded any interest, which
apparently is the norm in subrogation cases in England. Thus, “Nisbett Shipping was
unjustly enriched at the expense of Yorkshire Insurance”.
51 In the circumstances, the
solution would have been for the Canadian Government to pay the equivalent of £
72,000 so that Yorkshire would have been indemnified without Nisbett making a
windfall profit. But that way, the Canadian Government would have been relieved
from full responsibility for the collision which would be contrary to the inherent
principle of subrogation to make the responsible party liable for its wrongdoing and
the resulting loss.
52
Incidental to the Yorkshire Insurance and Urban Industries cases, and in stark
contrast to them, is the decision in the older English case of Armstrong
53 involving a
valued policy where the value of the insured ship was stated as £ 6000. When the
ship sank, the tortfeasor paid the £ 6000. Later, the assured shipowner was able to
recover £ 9000 which was the actual value of the ship. The court held, in essence,
that if a shipowner chooses to insure his ship at a fixed value rather than leaving the
contract as an ordinary, (unvalued policy), namely, “simply one of indemnity to the
extent of the real value, and if thereby any benefit accrues to the underwriters, the
underwriters must be entitled to it”.
54 The Armstrong case has been approved,
dismissed or distinguished in several English and American cases.
55
Further examination of the grounds which formed the basis for the decisions in
Yorkshire Insurance and the American case Urban Industries reveals other observations and issues which are relevant to this critique. In whose name can the insurer
exercising subrogation rights bring action against the tortfeasor is one issue. Under
English law, it is imperative that the insurer sue in the name of the assured from
whom he has acquired that right. This rule was affirmed in the relatively older case of
Simpson & Co. v. Thomson.
56 If this were not so, insurers would have been able to
recover under rights not derived from subrogation, which could also lead to claimants coming out of the woodworks invoking some kind of proprietary interest in the
ship as the insured property. In other words, virtually “anyone having a relationship
with the assured” could potentially claim that he suffered some kind of damage or
injury.
57 As evident in the American law, by contrast, the subrogated insurer is
51 Ibid.
52 Ibid; see specifically footnote 28 at p. 151.
53 Supra, note, 9.
54 Ibid. at p. 250.
55 See Bybee (1979), footnote 47 at pp. 154–155.
56 (1877), 3 App Cas. 279.
57 See Bybee (1979), footnote 51 at p. 156.
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575