Apex Law Journal
Apex Law Journal
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Neha Goel, Advocate

Advisory Board

S.C. Khunger, Advocate

Rohit Bansal, Advocate

Varinder Singh Kanwar, Advocate

Hittan Nehra, Advocate

Judgments on Subrogation

Sunday, February 28, 2010

Subrogation — Where the letter of subrogation executed by an assured in favour of the insurer contains, in addition to words referring to subrogation, terms which may amount to an assignment, whether the document ceases to be a subrogation and becomes an assignment? — Held, no — If the terms clearly show that the intention was to have only a subrogation, use of the words “assign, transfer and abandon in favour of” would in the context be construed as referring to subrogation and nothing more.


Subrogation — As an equitable assignment — Held, subrogation, as an equitable assignment, is inherent, incidental and collateral to a contract of indemnity, which occurs automatically, when the insurer settles the claim under the policy, by reimbursing the entire loss suffered by the assured — It need not be evidenced by any writing.


Subrogation — Held, can be classified under three broad categories: (i) subrogation by equitable assignment; (ii) subrogation by contract; and (iii) subrogation-cumassignment.


Subrogation — The principles relating to subrogation are :

 (i) Equitable right of subrogation arises when the insurer settles the claim of the assured, for the entire loss. When there is an equitable subrogation in favour of the insurer, the insurer is allowed to stand in the shoes of the assured and enforce the rights of the assured against the wrongdoer.

 (ii) Subrogation does not terminate nor puts an end to the right of the assured to sue the wrong-doer and recover the damages for the loss. Subrogation only entitles the insurer to receive back the amount paid to the assured, in terms of the principles of subrogation.

 (iii) Where the assured executes a Letter of Subrogation, reducing the terms of subrogation, the rights of the insurer vis-à-vis the assured will be governed by the terms of the Letter of Subrogation.

 (iv) A subrogation enables the insurer to exercise the rights of the assured against third parties in the name of the assured. Consequently, any plaint, complaint or petition for recovery of compensation can be filed in the name of the assured, or by the assured represented by the insurer as subrogee-cum-attorney, or by the assured and the insurer as co-plaintiffs or co-complainants.

 (v) Where the assured executed a subrogation-cumassignment in favour of the insurer (as contrasted from a subrogation), the assured is left with no right or interest. Consequently, the assured will no longer be entitled to sue the wrongdoer on its own account and for its own benefit. But as the instrument is a subrogationcum-assignment, and not a mere assignment, the insurer has the choice of suing in its own name, or in the name of the assured, if the instrument so provides. The insured becomes entitled to the entire amount recovered from the wrongdoer, that is, not only the amount that the insured had paid to the assured, but also any amount received in excess of what was paid by it to the assured, if the instrument so provides.

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