Subrogation in insurance and reinsurance
Produced in partnership with Eleanor Ruiz of Reed Smith and Mark Pring of Reed Smith

The following Insurance & Reinsurance practice note produced in partnership with Eleanor Ruiz of Reed Smith and Mark Pring of Reed Smith provides comprehensive and up to date legal information covering:

  • Subrogation in insurance and reinsurance
  • What is the right of subrogation?
  • Contracts of indemnity
  • The insurer’s equitable lien over third party recoveries
  • Top down allocation of recoveries
  • Subrogation contrasted with assignment, contribution and abandonment
  • Limits to subrogation
  • The insured must be fully indemnified
  • Limited to the rights of the insured
  • Recovery under a valued policy
  • More...

Subrogation in insurance and reinsurance

What is the right of subrogation?

In the context of insurance and reinsurance, the right of subrogation entitles an insurer or reinsurer, having indemnified the (re)insured, to ‘step into its shoes’ to bring an action in the (re)insured’s name. For the purpose of this Practice Note, ‘insurer’ should be taken to mean ‘(re)insurer’ and ‘insured’ should be taken to mean ‘(re)insured’.

The insurer can then exercise any of the insured’s rights or remedies against third parties in respect of the insured event. Once the insured has been indemnified, the scope of the insurer’s rights and remedies is coextensive with the insured’s rights and remedies against third parties in respect of the relevant loss. This includes any right in contract (fulfilled or unfulfilled), tort, or any other right, be it legal or equitable.

The insurer’s right to subrogation can be conferred in a number of different ways:

  1. it is a statutory right under section 79 of the Marine Insurance Act 1906 (MIA 1906)

  2. it is a right conferred by common law

  3. it can be expressly contained within the policy wording

MIA 1906, s 79 does not provide a comprehensive statement of the law of subrogation, but it does expressly recognise that the doctrine applies. The detail can then be found in the various common law authorities.

At common law, subrogation is an equitable remedy, intended to

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