The Implications of Drafting the Letter of Subrogation

It ensues that subrogation arises only where the insured has suffered a loss and has the option of recovering the loss from the wrongdoers, other than from the insurer. If the insured recovers the loss from the insurer, then his right to claim from the wrongdoer passes on to the insurer.

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Traditionally, in insurance, subrogation refers to the right of an insurer having indemnified an insured in respect of a particular loss to recover all or part of the claim payment.

The insured transfers their right of recovery against a third party who is responsible for causing the loss. The insurer, standing in the shoes of the insured, can initiate the recovery.

In other words, the right of the insurer, having indemnified the insured under a legal obligation to do so, to stand in the place of the insured and avail himself of all the rights and remedies of the insured, whether already enforced or not.

It ensues that subrogation arises only where the insured has suffered a loss and has the option of recovering the loss from the wrongdoers, other than from the insurer. If the insured recovers the loss from the insurer, then his right to claim from the wrongdoer passes on to the insurer. This is in keeping with the principle of indemnity, which disallows recovering from two or more sources for the same loss for more than the actual loss suffered.

The issue of subrogation merits deeper introspection. We will refer to the case of Oberai Forwarding Agency Vs. New India Assurance Co. Ltd to fathom the minute intricacies related to subrogation.

Facts of the case - M.S. Industries took a transit ( marine) policy from the New India Assurance Company Ltd.

M.S. Industries, through its agent, Oberai Forwarding Agency, hired two trucks from M/s. Bhasin Goods Carriers of Bareilly to transport broken rice to Barpeta, Assam. According to Oberai Forwarding Agency, the appellant in the above case , only settled the freight for the consignment. The consignments of the broken rice did not reach the destination as they were lost.