Subrogation simplified

The principle of subrogation in insurance law

SUBROGATION arises where the insurer, has compensated the insured in respect of damages suffered to the property of the insured as a result of a third party’s negligence and the insurer then steps into the shoes of the insured and pursues a claim against such third party.

THE FOLLOWING IS NECESSARY FOR VALID SUBROGATION:

• There must be a valid insurance contact: between the insurer and insured.

• Insurer must have indemnified the insured: meaning that, an insurer must both admit and pay everything due by it in respect of the particular claim of the insured

• Insured’s loss must have been fully compensated: occasionally the insured cannot recover full damages from the insurer or there may be an excess payable by the insured or the insured amount may be insufficient in relation to the damages. Should a third party in these circumstances be liable for the loss, the insured must first be compensated before the insurer can lay claim against the third party.

• Rights must be susceptible of subrogation: An insurer can claim subrogation only if the insured has a right against a third party, such as the right to claim for damages arising out of an accident.

Provided that all requirements are met, the doctrine of subrogation becomes operative. As a result, the insurer is entitled to enforce a claim on behalf of the insured.

The insurer is entitled to recover any money paid by it from the insured in the event that the insured recovered any loss from the third party in terms of a successful action.

It is noteworthy that the insured must not prejudice the insurer’s right of subrogation. He may not renounce any right of action he has against a third party which may result in his loss. If he does he will render himself liable to his insurer.

THE INSURED MAY AID THE RECOVERY PROCESS BY:

• Acquiring as much information as possible pertaining to the third party;

• Obtaining clear colour photographs of the accident highlighting all damage sustained;

• Reporting the accident to the relevant police station and keeping an accurate record of the accident number;

• Obtaining the contact details of independent witnesses; and

• Preparing a written statement and sketch of how the accident occurred whilst it is still fresh in the mind.

Written by Rowan Pillay, Candidate Attorney, J Leslie Smith And Company Inc.

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