Chapter 10

Question 1

What is subrogation

Answer 1

Right of one person to indemnify another and then recover losses from other indemnity rights

Question 2

Does subrogation apply to non indemnity policies

Answer 2

No

Question 3

How can subrogation operate?

Answer 3

The insured could recover the same loss twice (insurer and faulty party) and the insurer can then have an injunction so the insured pays it back.

The insurer can bring action against the third party but it must be for the whole loss not the part covered by the insured. This can be paid to the insured

Question 4

Subrogation recovery equal to the loss

Answer 4

This makes it easy to share as the whole loss will be borne by the third party. Excess recovered is passed on to insured and other remains with insured

Question 5

Subrogation recovery greater than the loss

Answer 5

Any surplus, the insured is entitled to keep it. The insurer is not entitled to recover more than it has paid.

Question 6

Recovery from subrogation less than the loss

Answer 6

No clear answer on how the money claimed is split.

Question 7

What are ex gratia payments

Answer 7

If the insurer pays out of no legal obligation they are not entitled to subrogate a third party

Question 8

Sources of subrogation rights

Answer 8

Tort
Contract
Statute
Subrogation salvage and abandonment

Question 9

What are subrogation rights subject to

Answer 9

Voluntary market wide agreements between companies (insurers waive there rights as admin costs often make it less effective)

Question 10

What conditions are satisfied for contribution to arise?

Answer 10

Each policy is liablee
Each insured the same interest in the subject matter
Two or more policies of indemnity exist
Each insured the peril which brings the loss

Question 11

Simple definition of subrogation

Answer 11

The right one person has to indemnify another and then claim the money back from another

Question 12

Why does the law allow subrogation

Answer 12

Prevent double indemnity and claim the loss from the person responsible

Question 13

Can insurers claim money which the insured receives as a gift for subrogation

Answer 13

No as it is intended for the insured

Question 14

Three main sources of subrogation

Answer 14

In tort contract and statute

Question 15

Escape clause

Answer 15

A form of non contribution clause which prevents the insured from having other insurance on the same risk

Question 16

What is a more specific insurance clause

Answer 16

Policy will pay only when cover from a more specific clause has been exhausted It acts a bit like an excess of loss

Question 17

Two main methods for calculation ratio of contribution

Answer 17

Maximum and independent

Question 18

Method for calculating ratio of contribution is employed in the case of liability insurance

Answer 18

Independent liability