Principle Of Subrogation In Insurance

Principle Of Subrogation is the legal doctrine of substituting one creditor for another. Subrogation is a right where a person has the standing in the place of another and availing himself of all the rights and remedies of that another, whether already enforced or not. In insurance, after payment of a claim, the insurers shall be entitled to take over the legal right of the insured against the liable third party for the purpose of recovery.

Everybody is entitled to live peacefully and if this peace is disturbed by the wrong doing of another than the person who has been subjected to this wrong has a legal right of action against the wrong doer. Here comes up the proposition then that if the damage sustained by the aggrieved is also covered by a policy of insurance then after getting the claim from insurers he gives up his right of recovery against the wrong doer in favor of his insurers. Insurers then proceed against the liable third party direct and recover the loss or damage for their own benefit.

An example will make this position clear. Let us assume that ‘A’ had been to New Market driving his car. After parking the car somewhere in front of the market he went inside, made some shopping, came back and found that ‘B’ was damaging the car. In law “A” has a legal right of action against ‘B’ for damages. Incidentally ‘A’ may also have a comprehensive motor insurance which protects him against such losses. Here ‘A’ has open to him two avenues of recovery and the principle of subrogation asserts that if the insurers pay the full loss then they (insurers) shall take over the right of ‘A’ (insured) for proceeding against B (third party) for their own (insurers) benefit.

In reality various other propositions may be thought about the principle of subrogation. For example, a carrier is primarily liable for safe delivery of the goods as per contract of affreightment. A bailee is primarily liable as per contract of bailment. Such goods may also be covered by insurance policies where the insurer’s liability is secondary. Here, even though the insurers would make payments in respect of a loss, nevertheless, they would be entitled to or subrogated to the right of the insured against the negligent or liable carrier or bailee.

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