Windfall in the Law of Subrogation: Marine Insurance in Motion

Abstract

The doctrine of subrogation is germane to the law of marine insurance and is intimately associated with the centrality of the principle of indemnity under which the assured is entitled to be fully indemnified by the insurer under the insurance policy but not beyond that amount so that the assured does not profit from his loss. In juxtaposition to indemnity, subrogation allows the insurer to “step into the shoes” of the assured after indemnifying his loss, and bring action against the responsible third-party to recoup what he has paid to the assured and prevent the latter from “double-dipping” or getting paid twice; once by the insurer and then by the perpetrator of the loss, which is in line with the principle of indemnity. But on occasion subrogation may engender a windfall. This chapter examines how such circumstances are treated by reference to English and American case law and relevant scholarly literature. It provides a critique of the leading cases and concludes that they are inconsistent, lacking in any definitive pronouncement of the law within the ambit of insurance, marine or otherwise.