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Introduction To Subrogation in Insurance

The document provides an introduction to the doctrine of subrogation in insurance law. [1] The doctrine was developed to prevent unjust enrichment and allows a person who satisfies a claim meant for another to take the place of and enforce the claim against the responsible party. [2] Subrogation substitutes one person for another with reference to a lawful claim or right, allowing the substituted person to succeed to the rights and remedies of the other concerning the debt or claim. [3] The doctrine has historically been invoked in various situations beyond just insurance contracts, such as contracts of guarantee.

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313 views

Introduction To Subrogation in Insurance

The document provides an introduction to the doctrine of subrogation in insurance law. [1] The doctrine was developed to prevent unjust enrichment and allows a person who satisfies a claim meant for another to take the place of and enforce the claim against the responsible party. [2] Subrogation substitutes one person for another with reference to a lawful claim or right, allowing the substituted person to succeed to the rights and remedies of the other concerning the debt or claim. [3] The doctrine has historically been invoked in various situations beyond just insurance contracts, such as contracts of guarantee.

Uploaded by

Anand Yadav
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Brief Introduction to Doctrine of Subrogation in Insurance Law

The doctrine of subrogation is one of the most recognized doctrines in common law.1 The
doctrine was developed to prevent unjust enrichment.2 For instance, in Assignee v. Mahoney,3
the cashier of a bank allowed the defendant to overdraw from her account. When the cashier
discovered the shortage, he gave his note for the amount. He subsequently became bankrupt
and the bank established its claim against him. The assignee, then, sued the defendant for the
amount. It was held in the case that the assignee was subrogated in place of the bank and could
sue the defendant for the said amount.4 The doctrine is of subrogation is only applicable to a
person who comes with clean hands.5Subrogation must be permitted in all cases where it can
prevent unjust enrichment and the plaintiff is entitled to equitable relief.6

The doctrine of subrogation has been defined in many ways. A dictionary definition of the term
would be—

“In Law the act or operation of law in vesting a person who has satisfied, or is
ready to satisfy, a claim which ought to be borne by another with the right to hold
and enforce the claim against such other for his own indemnification."7

Black’s Law Dictionary defines the doctrine as—

“The substitution of one person in the place of another with reference to a lawful
claim, demand or right, so that he who is substituted succeeds to the rights of the
other in relation to the debt or claim, and its rights, remedies, or securities.”8

A rather pithy exposition of the doctrine can be found in Justice Miller’s opinion in the Supreme

1
ML Marasinghe, ‘An Historical Introduction to the Doctrine of Subrogation: The Early History of the Doctrine I’,
10 Val. U. L. Rev. 45 (1975).
2
See 26 Harv. L. Rev. 364, 382 (1912-1913).
3
Assignee v. Mahoney, 150 S.W. 503 (Ky.).
4
Ibid.
5
See Johnson v. Moore, 33 Kan. 90, 5 Pac. 506.
6
In Re McBride, 19 N.B.R. 452.
7
The Century Dictionary.
8
The Century Dictionary.
Court of the United States Case of Aetna L. Ins. Co. v. Middleport9, where he wrote—

“The doctrine of subrogation is derived from the civil law, and ‘It is said to be a
legal fiction, by force of which an obligation extinguished by a payment made by a
third person is treated as still subsisting for the benefit of this third person, so that
by means of it one creditor is substituted to the rights, remedies, and securities of
another….It takes place for the benefit of a person who, being himself a creditor,
pays another creditor whose debt is preferred to his by reason of privileges or
mortgages, being obliged to make the payment, either as standing in the situation
of a surety, or that he may remove a prior incumbrance from the property on which
he relies to secure his payment. Subrogation, as a matter of right, independently of
agreement, takes place only for the benefit of insures; or of one who, being himself
a creditor, has satisfied the lien of a prior creditor; or for the benefit of a purchaser
who has extinguished an incumbrance upon the estate which he has purchased; or
of a co-obligor or surety who has paid the debt which ought, in whole or in part, to
have been met by another.’ Sheldon Subrogation, pp. 2,3.”

Another very important and controversial explanation of the doctrine can be found in Brett
L.J.’s opinion in Castellain v. Preston10—

“…that as between the underwriter the assured the underwriter is entitled to the
advantage of every right of the assured, whether such right consists in contract,
fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already
insisted on, or in any other right, whether by way of condition or otherwise, legal
or equitable, which can be, or has been exercised or has accrued, and whether such
right could or could not be enforced by the insurer in the name of the assured by
the exercise of acquiring of which right or condition the loss against which the
assured is insured, can be, or has been diminished. That seems to me put this
doctrine of subrogation in the largest form possible”

9
Aetna L. Ins. Co. v. Middleport, 124 U.S. 534, 538-9.
10
Castellain v. Preston, (1) 8 Q.B.D. 613 (1883).
It must be noted that even though the cases were decided in the context of an insurance contract,

the doctrine of subrogation was not restricted in the context of insurance contracts. It has

historically been invoked in various situations, especially in the context of a contract of

guarantee.11 Authors have distinguished the doctrine of subrogation as being applicable in three
12
distinct situations— legal subrogation, conventional subrogation and statutory subrogation. In

this project, we shall try to understand the concept in light of insurance law”.

11
Ibid.
12
James M. Mullen, ‘The Equitable Doctrine of Subrogation’, 3 Md. L. Rev. 202 (1939).

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