Principles of Subrogation
The doctrine of subrogation is a corollary to the principle of indemnity and applies only to fire and marine insurance. It is also known as ‘doctrine of rights substitution.’ According to it, when an insured has received full indemnity in respect of his loss, all rights and remedies which he has against third person will pass on to the insurer and will be exercised for his benefit until he (the insurer) recoups the amount he has paid under the policy. It must be clarified here that the insurer’s right of subrogation arises only when he has paid for the loss for which he is liable under the policy and this right extend only to the rights and remedies available to the insured in respect of the thing o which the contract of insurance relates.
It is the transfer of the right and remedies of the insured in ne subject matter to the insurer after indemnification. The Surer steps into the shoes of the insured after settling e claim. Further he is entitled to all rights of action against the third party to cover the loss from the responsible person regarding the subject matter of insurance after the claim of the insured have been fully settled or paid.
According to the Federation of insurance Institutes,” subrogation is the transfer of rights and remedies of the insured to the insurer who has indemnified the insured in respect of the loss”. The doctrine of subrogation does not apply in the case of personal insurance because the principle of indemnity is not applicable to such insurance. If the insured has got certain compensation from third party before being fully indemnified by the insurer, the insurer can pay only the balance of the loss. The principle of subrogation is introduced with the objective of safeguarding the interests of the insurers.
Features of subrogation
- It is an extension of the principle of indemnity.
- It is applicable to all contracts of indemnity.
- It arises only after the payment of the claim by the insurer to the insured.
- The right of subrogation may arise even before indemnification of the insured except in the case of marine insurance.
- As per the principle of subrogation the insurer has the right to sue against third party.
- If the insured gets any money from the third party as compensation after indemnification by the insurer, the insured can hold that amount of such compensation as a trustee for the insurer.
- Under the principles of subrogation insurer cannot recover anything more than the amount of indemnification paid to the insured.