Marine Cargo Insurance




Origins and nature of the right of subrogation

16.1 The insurer’s right to take legal proceedings in the name of the assured against a third party who has caused loss of or damage to the goods is of particular importance in marine cargo insurance. The amounts recovered in subrogation actions, known in practice simply as “recoveries”, form a significant element in the balancing of the cargo insurer’s underwriting account by improving the loss record. These recoveries apply to all types of transit risks, whether by land, sea or air, as well as to storage risks.1 16.2 The first part of this chapter looks at the origins and nature of subrogation which is then contrasted with assignment. After looking at the position of co-assureds, and the circumstances in which the right to subrogation is waived,2 we consider the issues that arise in practice where subrogation rights are exercised.3 The next section considers the special rules that apply to increased value insurance4 and we conclude by contrasting subrogation with salvage, where insurers are entitled, in principle, to take over ownership of the goods.5 The apportionment of sums recovered between insurers and assured (e.g., in the case of under-insurance) is dealt with in as an aspect of the measure of indemnity with which this issue is closely related.6 16.3 The insurer is subrogated to the assured’s rights whether the loss be a total loss or merely a partial loss, though in the case of a total loss the insurers are also entitled to take over the property in the goods, known as “salvage”.7 Section 79(1) of the Marine Insurance Act 1906 deals with subrogation and salvage in the following terms:

“Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss.”

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