The principle of subrogation is applicable only to the insurance contracts those are of contracts of indemnity. A very prominent question that crops up into our mind is Can an insured recover the damages from multiple sources? Why the insured shall not be entitled to recover from multiple sources ? Why he shall have to give up his right in favor of and for the benefit of the insurers ?
In fact it has to be borne in mind that the principle of indemnity prevents the insured from getting more than the actual amount of loss. As a result of a loss a person certainly cannot benefit or make a profit. Moreover, under the principle of indemnity it has been well asserted and established that after a loss the insured should get the actual amount of loss, neither more nor less. If this principle is to be maintained and preserved from any possible threat or defect, then it has to be ensured that all possible flaws are properly guarded and loopholes are properly blocked. Principle of subrogation is a method whereby the possibility of getting more than the actual amount of loss from various sources, thereby infringing the principle of indemnity, is defeated.
Therefore, it is also very correctly said that the principle of subrogation is indeed a corollary to the principle of indemnity, it has its birth from the principle of indemnity and it has its existence to preserve the principle of indemnity. It should be clearly borne in mind and appreciated that as the principle of subrogation is a corollary to the principle of indemnity, therefore, it applies only to those insurance contracts which are contracts of indemnity.
As such it has to be understood that subrogation does NOT apply to life insurance and personal accident insurance contracts as these are NOT contracts of indemnity.