Subrogation in insurance : a comparative study

Abstract

The insurer owes to his insured victim the guarantee promised in the contract of insurance as long as the damage is caused by a third party. When the damage caused is material, there are two rules regarding indemnity: Civil responsibility and the rule of Insurance. According to Civil law every person is responsible for the damage which he causes through his fault (Civil Code sec 1031) and must make good such damage with all his property present and future. Hence, according to general principle of Civil law a tortfeasor cannot escape liability by claiming that the insured has been indemnified by the Insurance Company. Along the same lines, the Insurance Company cannot be made to make good the damage caused by a third party extraneous to the contract of insurance because such party did not contribute to the payment of premiums. Thus, the Insurance Company should be in a position to act against the third party responsible and lessen the burden on the insureds and get reimbursed by the tortfeasor. This is possible through the institute of subrogation and such a right has been recognised in England for centuries through equity. It is only fair and logical, that once the Insurance Company has then proceed against indemnified the insured, it can the third party responsible in order to get recouped what it paid to the insured. The extent of subrogation is only limited by the actual sum paid to the insured.