Chapter 14. Subrogation, Measure of Loss and Reinstatement

• Pages: 238-252

CHAPTER 14

SUBROGATION, MEASURE OF

LOSSANDREINSTATEMENT

14.1 INTRODUCTION

Subrogation is an equitable doctrine adopted solely for the purpose of preventing the insured

from recovering more than full indemnity. It does so by placing the insurers in the position

of the insured.

1 While the elements of an insurer’s cause of action are based upon equity,

satisfaction is achieved through law.

2 The doctrine of subrogation is applicable in a variety of

situations, but it is not available to life insurance

3 or personal accident insurance.

4 A plethora

of regional case law, such as Musson ( Jamaica) Ltd v Clarke , 5 Royal Caribbean Insurance Ltd v Marcial 6

and Walwy. v Archibald and RBTT Bank (SKN) Ltd , 7 suggest not only an adherence to British juris-

prudence but also the existence of various circumstances which can give rise to subrogation.

Regarding the measure of loss, not only must one consider the value of the subject matter

lost or damaged, but the provisions of the insurance policy which may contain average clauses,

excess and franchise clauses, salvage and reinstatement. This is complicated when payments

are made by third parties.

8 Early on, in the Barbadian decision of Oliver v New India Assurance Co.

Ltd , 9 Hallinan CJ asserted:

(i) the burden of proving the value of the vehicle at the time of its loss was on the appellant; (ii)the

admitted total loss not only established the event in which an indemnity was payable under the con-

tract of insurance, but the character of the article lost was prima facie evidence that it was of same value.

In the recent Bermudian case of Argus Insurance Co. Ltd v Somers Isles Insurance Co. Ltd et al . 10 resting

on priorities, Kawaley CJ stated: ‘The general rule as regards priorities when an insured makes a

recovery from a third party and his own insurer has a subrogation claim that if the insured makes a

recovery from a third party, after the insurer has made a payment under the policy, the assured can

retain what he has recovered until he is fully indemnifi ed.’ He holds the rest subject to any equitable

lien in favour of the insurer up to the value of the insurer’s payment. The assured is however, entitled

to deduct the costs of recovery from the third party before he is obliged to account to the insurer.

11

1 R. Hasson, ‘Subrogation in Insurance Law– The Critical Evaluation’ (1985) 5 OJLS 416.

2 R. Hodgin, Insurance Law: Text and Materials (Cavendish Publishing Ltd: 1998), p. 563.

3 Solicitors & Central v Lamb (1864) 1 De GJ & Sm 251; John Edwards & Co. v Motor Union Insurance Co. Ltd . [1922]

2 KB 249.

4 Morris v Ford Motor Co . [1973] 2 All ER 1084, CA.

5 JM 2016 CA 85.

6 TT 1991 HC 63.

7 KN 2014 CA 2.

8 See Argus Insurance Co. Ltd v Somers Isles Insurance Co. Ltd et al . (Supreme Court of Bermuda No. 6 of 2012). The

general rule as regards priorities:

If the insured makes a recovery from a third party, after the insurer has been compensated the

assured is, however, entitled to deduct the costs of recovery from the third party before he is

obliged to account to the insurer made a payment under the policy, the assured can retain what

he has recovered until he is fully indemnifi ed, but he holds the rest subject to any equitable lien

in favour of the insurer up to the value of the insurer’s payment.

9 BB 1961 HC 23.

10 BM 2014 SC 91.

11 J. Birds, B. Lynch and S. Milnes, MacGillivray on Insurance Law: Centenary Edition , 12th edn (Sweet & Maxwell:

2012), para. 23-068.