Article by Nobert Musa Phiri

Subrogation in insurance expresses the right of the insurer who has settled a claim to be put in the position and become entitled to every right and remedy of the insured against third parties.[1]Subrogation embraces a set of rules providing a right of recourse for an insurer which has indemnified the insured. Like all triangular legal relationships, the legal position of insurer, insured and third party in the traditional subrogation situation can become rather complicated[2]. Further when applied in practice these principles can become clouded.

HOW DOES SUBROGRATION WORK/ SUBROGATION IN ACTION

It is important in subrogation situations to appreciate its application and scope. Once the insurer has indemnified the insured in full, the insurer enforces the rights of the insured against a third party. The insured thus has a positive duty to assist the insurer in enforcing these rights. This duty entails a right not to act in any way that may prejudice the insurer’s right of subrogation and this may include not releasing a third party from any obligation partially or in full.

A simple example in motor insurance will be used to illustrate how subrogation works. A ( the insured)  is insured with B ( the insurer) for damage against her motor vehicle in the sum of $10 00. A and C (third party) are involved in an accident in which C is fully liable. The damages caused by C amount to $ 3500.

Parties often act of character immediately after a motor –vehicle accident and the following reactions ensure;

A to  C , “Don’t worry , I am fully insured and will not claim any damages from you “

C to A ,“ I am offering to pay $1000 upfont in full and final settlement”

Now of course such conduct blissfully ignores B (insurer ) who is not present but  has interest in the matter. In terms of the subrogation principle once B has paid out a claim in full, B is entitled at law to sue C. In the example above A can therefore not release C from liablity and cannot accept the partial offer from C. A has a duty to B to ensure that B will be able to claim from C . Simply put the insured cannot release a third party partially or in full as this might prejudice the insurer’s right of subrogation. Should the insured breach this duty they will be liable to pay damages to the insurer.

Subrogation is an important principle in indemnity insurance. It thus crucial in subrogation matters to appreciate the application of the principle and the its potential scope. Subrogation remains one of the most litigated aspects of our insurance law, and thus its triangular relationship nature must thus be understood.

[1]The Law of Subrogation ;Charles Mitchell

[2] Insurance Subrogation, Implied or Expressed: In the name of the Insured, Always : JP Van Niekerk