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Subrogation rights arising from marine insurance contracts

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The Principle of Indemnity in Marine Insurance Contracts

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References

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  8. Burnard v Rodocanachi (1887)3 App.Cas 279, at 339 per Blackburn LJ.

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  9. (1887)3 App Cas 279, at 284, per Lord Cairns who stated: “...where one person has agreed to indemnify another he will, on making good the indemnity, be entitled to succeed to all the ways and means by which the person indemnified might have protected himself against or reimbursed himself for the loss.”

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  10. (1883)11 QB 380, at 401, Bowen LJ stated:. “.....a person who wishes to recover for a total loss if he has a means of diminishing the loss, the result of the use of those means belongs to the underwriters. If he does diminish the loss, he must account for the diminution to the underwriters.”

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  11. (1882)7 App Cas 333, at 339, Lord Blackburn stated: “...where there is a contract of indemnity, and loss reduces or diminishes the amount which the indemnifier is bound to pay; and if the indemnifier has already paid it, then, if anything which diminishes the loss comes into the hands of the persons 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”.

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  12. In Simpson v Thompson (1887)3 App Cas 279, Lord Blackburn pointed out (at 293) that the right arose from the fact that the underwriters had paid an indemnity, and in Darrell v Tibbitts (1880)5 QBD 560, (at 563), Brett J. observed that after the assured has been paid, is the insurer actually put into the place of the assured with regard to every right given to him by the law respecting the subject-matter insured; in Page v Scottish (1929) 140 LT 151, (at 578) Scrutton LJ stated that the underwriter has no right until and unless he indemnifies the assured under the policy.

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  14. Both insurers have the right of subrogation and the general average contribution has to be apportioned among them as per their insured value. It has been proposed that if an insurer has part of coverage of the subject-matter insured and the other insurer has insured the other part, then both have a joint subrogation right (Chen S (1999) Subrogation in the Law of Marine Insurance, PhD Thesis, University of Southampton, p 14).

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  19. This was the ground of L.J.Brett’s decision in the Case of Castellain v Preston (1888)11 QBD 380, and was considered also to have been the ground of the decision of the House of Lords, in the case of Burnand v Rodocanachi (1881)6 QBD 633; however, as it appears after more careful consideration of the ruling, it is to be said that the House of Lords justified these decisions not on the ground suggested by Brett LJ but because the payments, though voluntary, were-by the very terms of the declaration under which they were made — intended to compensate those who had actually been the losers by the Spanish depredations.

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  33. The judgement of Brett LJ in this case, described later on by Diplock J as the locus classicus of the doctrine of subrogation in insurance law, has set out the full extent of the rights to which the insurer is subrogated.

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  34. Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1961] 1 Lloyd’s Rep. 479.

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  35. In the case of Attorney-General v Glen Line Ltd, [1930] 36 Com Cas 1., a dispute arose as to whether a claim by the Crown, as reinsuring underwriters, to be entitled to a sum paid by the German Government as compensation to shipowners was well founded. It was held that the sum recovered by the former owners was not paid to them in respect of the loss of their ship but in respect of losses they might reasonably have expected to make by the use of their ship, and it was not therefore a sum to which the underwriters were entitled by reason of their payment of a total loss under policies insuring the ship itself (Lambeth RJ (1986) Templeman on Marine Insurance: Its Principles and Practice, 6th edn, Pitman, pp 451–462).

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  36. Hodges S (1999) Cases and Materials on Marine Insurance Law, Cavendish Publications, p 17.

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  37. [1988] 3 WLR 730 HL; On this principle, it was held in Simpson v Thomson [(1877)3 App Cas 279] that, where a ship was sunk in collision with another ship of the same ownership, the underwriters-who had paid a total loss on the ship sunk had no right of recovery from the owner-although the other ship was at fault. Where a policy on cargo was effected by a ship-owner on behalf of the cargo-owner, it was held that the underwriters were entitled to pursue a claim under subrogation in the name of their assured, i.e. the cargo-owner, against the ship-owner in whose name as agent only the policy had been effected (“The Yasim” [1979]2 Lloyd’s Rep 45; Lambeth RJ (1986) Templeman on Marine Insurance: Its Principles and Practice, 6th edn, Pitman, pp 451–462).

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  39. This was made clear in the case of Edwards & Co Ltd v Motor Union Insurance Co Ltd [1922] 2 KB 249; Lambeth RJ (1986) Templeman on Marine Insurance: Its Principles and Practice, 6th edn, Pitman, pp 451–462.

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  40. [1922] 2 KB 249.

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  41. Re London County Commercial Reinsurance Office Ltd [1922] 2 Ch 67; O’May D (1993) Marine Insurance Law and Policy, LLP, p 463.

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  47. Mustill MJ, Gilman JCB (1981) Arnould’s Law of Marine Insurance and Average, 16th edn, vol I, Stevens, Ch 31: In practice, insurers rarely accept abandonment, for it carries with it not only rights but also liabilities in respect of the abandoned property. Obvious liabilities are expenses incurred for the removal of the wreck and damage caused by oil pollution. (River Wear Comrs v Adamson (1877)2 App Cas 743, The Mostyn [1928] AC 57, Arrow Shipping Co v Tyne Improvement Comrs (1894)AC 508) Should, however, the insurer agree expressly or implicitly to assume ownership over the remains of the subject-matter insured, he would be able to retain any profit made on its sale. (Attorney General v Glen Line Ltd [1930]36 Com Cas 1, Yorkshire Insurance Co v Nisbett Shipping Co Ltd [1961] 1 Lloyd’s Rep. 479) It may be contended by some that, in this respect, the principle of indemnity has failed to realise its full potential and that the contract is not one of perfect indemnity. In accepting the abandonment, the insurer takes over not only rights but also liabilities in relation to the remains of the subject-matter insured. It could, therefore, be validly argued that as he had assumed all responsibility in respect of the subject-matter insured, he should be allowed to keep any reward arising there from.

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  50. It would be inferred from Napier v Hunter [1993] 1 Lloyd’s Rep. 10 that the-Courts will hold in future that insurers are entitled to be simply subrogated to their assured’s right of action from the moment the latter is fully indemnified under the policy terms, even though he may not have been fully compensated for his loss.

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  59. Derham SR (1985) Subrogation in Insurance Law, p. 134; What applies in practice in case of a deductible is that recoveries against any claim subject to a deductible are credited to the underwriters in full to the extent of the sum by which the aggregate of the claim unreduced by any recoveries exceeds the deductible.

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  68. The insurer becomes subrogated to the insured’s rights only to the extent actually paid on the policy. See Aetna Ins Co v United Fruit Co 304 US 430 S.Ct.959, 82L.Ed. 1443 (1938).

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(2007). Subrogation rights arising from marine insurance contracts. In: The Principle of Indemnity in Marine Insurance Contracts. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-49074-6_5

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