Insurance Subrogation

Table of Contents

ACKNOWLEDGEMENT ........................................................... ERROR! BOOKMARK NOT DEFINED.

INTRODUCTION .......................................................................................................................... 2 RESEARCH METHODOLOGY...................................................................................................... 3 OBJECTIVES ........................................................................................................................... 3 HYPOTHESIS .......................................................................................................................... 3 RESEARCH QUESTIONS ......................................................................................................... 3 SCOPE AND LIMITATIONS ..................................................................................................... 3 CITATION METHOD ............................................................................................................... 4 THE DOCTRINE OF SUBROGATION ........................................................................................... 5 DEFINITION ............................................................................................................................ 5 THE CHANGING CONTOURS OF THE DOCTRINE: FROM SIMPSON TO PRESTON .................... 7 SIMPSON V. THOMSON .......................................................................................................... 7 CASTELLAIN V. PRESTON: DOCTRINE OF SUBROGATION TO ENFORCE THE FUNDAMENTAL RULE ............................................................................................................ 8 AFTER CASTELLAIN .............................................................................................................. 9 SUBROGATION IN INSURANCE CONTRACTS ........................................................................... 11 THE GENYSIS OF SUBROGATION IN INSURANCE LAW....................................................... 11 APPLYING CASTELLAIN ...................................................................................................... 11 DIVERGENCE FROM CASTELLAIN....................................................................................... 12 THE INDIAN LAW OF SUBROGATION ...................................................................................... 15 VASUDEV MUDALIAR V. CALEDONIAN INSURANCE CO. ................................................... 15 UNION OF INDIA V SRI SARADA MILLS .............................................................................. 16 ECONOMIC TRANSPORT V CHARAN SPINNING MILLS ...................................................... 16 CONCLUSION ........................................................................................................................... 18

INTRODUCTION

The doctrine of subrogation has confounded academicians and practitioners for many decades due to its elusive nature. The doctrine has undergone various changes throughout the last two centuries in various contexts. A review of the cases applying the doctrine would demonstrate its flexibility and fecundity. It holds a special place in common law jurisdictions due to its nature and importance in indemnity contracts. In fact, it is often viewed as a necessary feature of the contract of indemnity.1 It has a special place in contracts of insurance which are also contracts of indemnity. It has been reformulated in a seminal case to include principles of equity within its ambit and entitle insurers to equitable reliefs. Currently, Indian Courts are averse of applying equitable principles as robustly as common law courts, especially in commercial laws due to the very nature of adjudication it undertakes. Thus, the common law doctrine of subrogation must be understood in India in such a perspective. This project seeks to understand the doctrine in this manner by investigating whether Indian courts grant wide equitable reliefs under the doctrine. In the first part of the project, we shall understand the doctrine from a historical perspective. In the second part, we see how cases have applied the doctrine in insurance contracts. In the third part, we see its applicability in the Indian context and the controversies which have arisen due to the doctrine.

1

C Mitchell, the Law of Subrogation (Oxford, Clarendon Press, 1994) 68–74.

RESEARCH METHODOLOGY

OBJECTIVES

This project aims to do the following— 

Understand the concept of subrogation from a historical perspective.



Understand the applicability of the doctrine of subrogation in common law.

 

Understand the doctrine of subrogation, as applied in the Indian context.

HYPOTHESIS

The project moves with the assumption that the doctrine of subrogation in India entitles insurers to equitable reliefs.

RESEARCH QUESTIONS

I. II. III.

What is the Doctrine of Subrogation in Common Law? Does the Doctrine of Subrogation include equitable principles? How has the Doctrine been understood in India?

SCOPE AND LIMITATIONS

This research has been limited to a study of select cases from common law jurisdictions and few seminal Indian cases.

CITATION METHOD The OSCOLA citation guidelines have been followed for this project.

THE DOCTRINE OF SUBROGATION

DEFINITION The doctrine of subrogation is one of the most recognized doctrines in common law.2 The doctrine was developed to prevent unjust enrichment.3 For instance, in Assignee v. Mahoney,4 the cashier of a bank allowed the defendant to overdraw from her account. When the cashier discovered the shortage, he gave his note for the amount. He subsequently became bankrupt and the bank established its claim against him. The assignee, then, sued the defendant for the amount. It was held in the case that the assignee was subrogated in place of the bank and could sue the defendant for the said amount.5 The doctrine is of subrogation is only applicable to a person who comes with clean hands.6Subrogation must be permitted in all cases where it can prevent unjust enrichment and the plaintiff is entitled to equitable relief.7 The doctrine of subrogation has been defined in many ways. A dictionary definition of the term would be— “In Law the act or operation of law in vesting a person who has satisfied, or is ready to satisfy, a claim which ought to be borne by another with the right to hold and enforce the claim against such other for his own indemnification."8 Black’s Law Dictionary defines the doctrine as— “The substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies, or securities.”9 A rather pithy exposition of the doctrine can be found in Justice Miller’s opinion in the ML Marasinghe, ‘An Historical Introduction to the Doctrine of Subrogation: The Early History of the Doctrine I’, 10 Val. U. L. Rev. 45 (1975). 3 See 26 Harv. L. Rev. 364, 382 (1912-1913). 4 Assignee v. Mahoney, 150 S.W. 503 (Ky.). 5 Ibid. 6 See Johnson v. Moore, 33 Kan. 90, 5 Pac. 506. 2

7

In Re McBride, 19 N.B.R. 452. The Century Dictionary. 9 The Century Dictionary. 8

Supreme Court of the United States Case of Aetna L. Ins. Co. v. Middleport10, where he wrote— “The doctrine of subrogation is derived from the civil law, and ‘It is said to be a legal fiction, by force of which an obligation extinguished by a payment made by a third person is treated as still subsisting for the benefit of this third person, so that by means of it one creditor is substituted to the rights, remedies, and securities of another….It takes place for the benefit of a person who, being himself a creditor, pays another creditor whose debt is preferred to his by reason of privileges or mortgages, being obliged to make the payment, either as standing in the situation of a surety, or that he may remove a prior incumbrance from the property on which he relies to secure his payment. Subrogation, as a matter of right, independently of agreement, takes place only for the benefit of insures; or of one who, being himself a creditor, has satisfied the lien of a prior creditor; or for the benefit of a purchaser who has extinguished an incumbrance upon the estate which he has purchased; or of a co-obligor or surety who has paid the debt which ought, in whole or in part, to have been met by another.’ Sheldon Subrogation, pp. 2,3.” Another very important and controversial explanation of the doctrine can be found in Brett L.J.’s opinion in Castellain v. Preston11— “…that as between the underwriter the assured the underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already insisted on, or in any other right, whether by way of condition or otherwise, legal or equitable, which can be, or has been exercised or has accrued, and whether such right could or could not be enforced by the insurer in the name of the assured by the exercise of acquiring of which right or condition the loss against which the assured is insured, can be, or has been diminished. That seems to me put this doctrine of subrogation in the largest form possible”

10

Aetna L. Ins. Co. v. Middleport, 124 U.S. 534, 538-9.

11

Castellain v. Preston, (1) 8 Q.B.D. 613 (1883).

It must be noted that even though the cases were decided in the context of an insurance contract, the doctrine of subrogation was not restricted in the context of insurance contracts. It has historically been invoked in various situations, especially in the context of a contract of guarantee.12 Authors have distinguished the doctrine of subrogation as being applicable in three distinct situations— legal subrogation, conventional subrogation and statutory subrogation.

13

In this project, we shall try to understand the concept in light of insurance

law.

THE CHANGING CONTOURS OF THE DOCTRINE: FROM SIMPSON TO

PRESTON

SIMPSON V. THOMSON

The Doctrine of Subrogation was a doctrine which was, historically, developed in the domain of guarantee contracts and predominantly applied in insurance contracts and cases of unjust enrichment.14The Doctrine was limited to rights of action in torts and contract.15In the seminal case of Simpson v. Thomson16, Lord Cairns understood the doctrine in the following terms— “On payment the insurers are entitled to enforce all the remedies, whether in contract or in tort, which the insured has against third parties, whereby the insured can compel such parties to make good the loss insured against.” In Simpson, the respondents were underwriters who paid Burrell for the loss of his ship as total loss after it was abandoned. The ship collided with another ship, the Fitzmaurice, due to the negligence of the master of Fitzmaurice. However, interestingly Burrell owned both the ships. The question in this case was whether the underwriters had a claim from Burrell due to him owning the Fitzmaurice and the negligence of its master. The Court of Sessions

12 13 14

Ibid. James M. Mullen, ‘The Equitable Doctrine of Subrogation’, 3 Md. L. Rev. 202 (1939).

Mitchell C, 'Subrogation, Unjust Enrichment and Remedial Flexibility.' (1998) 6 RLR 144. Chitty J., quoted in Castellain v. Preston. 16 Simpson v. Thomson, (1877) 3 App.Cas. 279. 15

found that a “fresh right” was created in the underwriter’s favour and the underwriter would be entitled to payment from Burrell. However, the House of Lords, on appeal, rejected this formulation and held that the underwriters could only claim subrogation. Since, in that case Burrell could not have claimed from himself, there was no right or action to which Burrell could be subrogated.17The Court distinguished subrogation as a “transfer of a right of action”18from the Court of Session’s “fresh right created”. The Court, clearly and, in our opinion, rightly distinguished subrogation from equity. Authors have vehemently criticized the judgment for being unjust for not applying equity, while maintaining the distinction between subrogation and equity.19 CASTELLAIN V. PRESTON: DOCTRINE OF SUBROGATION TO ENFORCE THE FUNDAMENTAL RULE

A notable divergence from Simpson was seen in the Queen’s Bench judgment in Castellain. As noted above, Simpson was criticized for not meting justice to the underwriters in the case. In a case where subrogation, as formulated by Simpson, does not apply, it was felt that an equitable relief must be granted. The Courts were competent to do so. However, Castellain took a very different approach. In Castellain, the Chairman of Liverpool and London and Globe Insurance Company (Insurer) issued a policy against the insured’s building. The insured entered into a separate sale agreement with the purchasers after issuing the policy. Later, a fire broke out in the insured building. The insurer paid a sum of 330 Pounds pursuant to the policy. The purchase agreement was completed after the settlement, without taking the loss due to fire into account. It was claimed by the insurer that, due to the purchase agreement the insured incurred profit, which was against the principle of an insurance contract. As noted above, Chitty J., in the first instance, denied the insurer’s claim by relying on the formulation of subrogation in Simpson. On Appeal, however, this position was reversed. Brett L.J.’s pithy exposition of the law in the judgment is quite accurate in the formative part where he lays down two fundamental 17

ibid. Ibid at 293. 19 Philip S. James, ‘The Fallacies of Simpson v. Thomson’, 34 The Modern Law Review 150 (1971). 18

rules of insurance law20— 1. A Contract of insurance in a marine or fire policy is a contract of indemnity. 2. In case of loss, against which the policy is made, the assured is entitled to full indemnity, but never more. It is, thus, clear from the above formulation that the court had to prevent unjust enrichment in an insurance contract. This consideration further guided the Court to reformulate the doctrine of subrogation. Brett L.J. noted that that earlier the doctrine of subrogation was not applicable to insurance contracts as underwriters were not sureties, as in contracts of guarantee or indemnity. However, Brett L.J. noted that the doctrine of subrogation is a necessary doctrine to enforce the fundamental rule. The question, then, was whether the doctrine was limited to enforcement of tort and contractual remedies only. Of course, if the doctrine as formulated in Simpson were to be followed, there was no right to be subrogated for in Castellain. The insured would have certainly profited from the sale agreement, and consequently breached the fundamental rule. This, in our opinion, was the guiding principle behind Castellain. Due to this, Brett L.J. considerably extended the application of the Doctrine to include equitable rights within it. Brett L.J.’s final formulation of the doctrine has been stated in the preceding part of this chapter. As a result, the doctrine of subrogation is now understood as including accrued as well as exercised rights, legal or equitable. AFTER CASTELLAIN

While Castellain has often been treated as the most authoritative exposition of the law of subrogation, its understanding of the doctrine has been criticized in a number of instances. Castellain was described as “a decision which, though at least partially just in result must have puzzled every student of law.”21 It was argued that subrogation was incorrectly confused with equity and the court should have applied equity in such a case instead of

Brett L.J. captures this rule in a single proposition stating— “The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified.” 20

21

Philip S. James, ‘The Fallacies of Simpson v. Thomson’, 34 The Modern Law Review 150 (1971).

conflating subrogation.22As a matter of fact, subrogation itself was based on equity.23 The High Court of Australia, too, distinguished Castellain as a case applying equity and not subrogation by writing— “It was said in the Supreme Court in the present case that Castellain v. Preston was a case of subrogation…we think this is a mistake, Castellain v. Preston of course was not a case of subrogation in respect of an outstanding right of action and one might almost wish that some other word had been used as the label of a right which exists when it is too late for subrogation in the ordinary sense.”24 It is still unclear whether Castellain is still applied across the world. In India, the Marine Insurance Act, 1963 recognizes the Castellain formulation by providing— “79. Right of subrogation.— 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 rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss.”25 By providing subrogation for all “rights” it seems to have accepted Castellain’s formulation of including equitable rights as well. Castellain has led authors to distinguish between legal (Simpson) and equitable (Castellain) subrogation. In the next section, we shall explore how the doctrine has been applied in the context of insurance contracts.

22

Ibid. Ibid. 24 British Traders’ Insurance Co. Ltd. v. Monson, [1964] HCA 24. 23

25

Section 79, Marine Insurance Act, 1963.

SUBROGATION IN INSURANCE CONTRACTS

THE GENYSIS OF SUBROGATION IN INSURANCE LAW

As noted above, subrogation was not applied in insurance law until much later as underwriters in an insurance contract were not sureties.26 It was only after an insurance contract was recognized as a contract of indemnity that the principle was extended to insurance law as well.27The law of subrogation has been mostly developed in common law and, in this section, we shall be dealing with cases from common law jurisdictions before turning to the Indian law in the next section. The doctrine has mostly attracted the attention of practitioners rather than academics and is treated as an “indispensable part of insurance law.”28 Thus, it is necessary that this project includes a thorough study of certain landmark cases on the law of subrogation. It must be noted though, that the doctrine of subrogation does not apply to all forms of insurance contracts. As noted above, it only applies to insurance contracts which are contracts of indemnity. Since, life insurance contracts and accident insurance were not contracts of indemnity. However, this position has not been fleshed out with much clarity.29 But it is also highly unlikely that victims in such insurance policies would ever be unjustly enriched and the position has not really been tested before courts.30 APPLYING CASTELLAIN

Manley v. Montgomery Bus Company One of the notable cases from the United States where the Court applied the doctrine of subrogation in a broad manner was in the Superior Court of Pennsylvania judgment in

26

Castellain. Darrell v. Tibbitts, (1880) L.R. 5 Q.B. 560. The Court noted that the contract of fire insurance is a contract of indemnity. 28 See Dalby v. India and London Life Assurance Co, (1854) 15 CB 365; Bradburn v. Great Western Railway Co, (1874) LR 10 Ex I. 27

29

ibid. Reuben Hasson, ‘Subrogation in Insurance Law—A Critical Evaluation’, 5(3) Oxford Journal of Legal Studies 416 (1985). 30

Manley v.Montgomery Bus Company31. In Manley, a policy was taken by Manley to indemnify him against loss arising from any collision in which his automobile might thereafter be injured. Eventually the car collided and both Manley and his car suffered injuries and damage. He was indemnified under the policy. Pursuant to the policy, Manley delivered a subrogation receipt. Before the insurance amount was paid, Manley had brought a suit for injuries and damages to the car, against the bus company. They ended up settling only for the amount for personal injury, and Manley abandoned the claim for damage to the car. The trial court awarded Manley a sum of $2,200 for personal injury. The insurer claimed that the settlement was entered into without the knowledge of the insurer. It claimed subrogation to the rights of the insured in the judgment to the extent of the sum it paid for damages. As we discussed above, the insurer would not have a technical right of subrogation as there is no right or claim which is the subject matter of the insurance.32 Manley received nothing for damage to his vehicle and, thus, the claim was argued in a wrong manner. It would have made better sense to argue that the settlement must be void due to non-disclosure and ignoring the subrogation terms. Interestingly, the court took note of it and said that— “The judgment having been obtained in an action in which the whole plaintiff’s right was asserted, a part of which belonged to the petitioner here, we are of the opinion that the latter is entitled to be made whole to the extent of the indemnity paid.” Thus, the Court held that the insurer would get the amount it paid up, from the $2,200 paid to Manley, as the whole right was claimed. Although there are distinctions to be drawn from Castellain, the net effect of the judgment seems to be providing an equitable relief to the insurer. This judgment, too, has been distinguished as applying equity rather than subrogation as understood in a technical sense.33 DIVERGENCE FROM CASTELLAIN

31 32

Manley v. Montgomery Bus Company, 82 Pa. Super. Ct. 530 (1924).

It must be noted that this issue did not arise in Castellain to the fullest extent, although Chitty J. considered it in the first instance. 33 William Otis Jr. Badger, ‘Subrogation’, 62 Ins. L.J. (I) (1924).

Somersall v. Friedman The Canadian Supreme Court relied on Castellain in a notable instance in Somersall v. Friedman34, In Friedman, the insured respondents suffered injuries of serious nature in a vehicle collision and sued the driver of the other vehicle, who was underinsured. The insured respondents entered into an agreement with the underinsured driver, pursuant to which the driver would admit liability for the accident and the respondent would not sue him beyond the extent of his insurance coverage. The insurers claimed that the insured respondents have interfered with the insurers’ right of subrogation by entering into the said agreement. The Court rejected this contention, by noting that that in the absence of contractual terms to the contrary, the insurer’s right of subrogation will not arise until the insured has been fully indemnified. Rejecting the insurers’ arguments and relying on Castellain, the Court wrote— “…it is important to keep in mind the underlying objectives of the doctrine of subrogation which are to ensure (i) that the insured receives no more and no less than a full indemnity, and (ii) that the loss falls on the person who is legally responsible for causing it…The doctrine of subrogation operates to ensure that the insured received only a just indemnity and does not profit from the insurance: see Castellain v Preston (1883), 11 QBD 380 (CA), at pp 386–87; AFG Insurances Ltd v City of Brighton (1972), 126 CLR 655 (HC Austrl)…Consequently, if there is no danger of the insured’s being overcompensated and the tortfeasor has exhausted his or her capacity to compensate the insured there is no reason to invoke subrogation. Similarly, if the insured enters into a limits agreement or otherwise abandons his or her claim against an impecunious tortfeasor the insurer has lost nothing by the inability to be subrogated.” In our opinion, this is a correct application of the Castellain ratio. By limiting it to the holding that subrogation is only available in cases where there is unjust enrichment. This is a much more temperate approach towards Castellain. The Court also delineated an equitable relief for technical breaches of subrogation rights.35However, it failed to distinguish Castellain on this ground in a complete manner. This is, perhaps, because Castellain was

34

Somersall v. Friedman, [2002] 3 S.C.R. 109 (Canada).

35

Somersall, at para 52.

affirmed in its ratio by the Canadian Supreme Court in Guardian Assurance Co. v. Town of Chicoutimi,36 this case, however, must be noted for not applying the equitable subrogation as formulated by Brett L.J. in Castellain, even after affirming it.37

36 37

Guardian Assurance Co. v. Town of Chicoutimi, [1915] 51 SCR 562. Roger Harris , 'Insurance Subrogation.' (1993) 22(2) Can Bus LJ 308.

THE INDIAN LAW OF SUBROGATION

The law of insurance is still in its nascent stages as compared to other common law jurisdictions.38 This has been attributed due to the lesser volume of commerce in India and the lack of credit and investment information.39 The law of subrogation, too, has witnessed a paucity of treatment from Indian Courts.40While statutes have explicitly recognized this right in the context of Marine Insurance as a necessary incident in a contract of indemnity.41 The Courts have not received enough appropriate lis to develop the law as other common law jurisdictions did. While Courts did indulge with the doctrine in other respects, for example in the context of transfer of property42, the courts indulged with it in respect of insurance contracts much later.

VASUDEV MUDALIAR V. CALEDONIAN INSURANCE CO. One of the earliest instances in which a right of subrogation was examined in the context of insurance contracts was in the High Court of Madras case of Vasudev Mudaliar v Caledonian Insurance Co.43 In Vasudev, the insured took a motor vehicle insurance and later met an accident due to the negligence of a third party. The inured was fully indemnified under the policy issued by the insurer. The insurer, then took over the car after paying by treating the case as a total loss. The insurer later sold the car for a lesser price and brought a suit to recover the rest of the amount from the third party lorry driver. Since, the insured was not a party to the suit, the insurer claimed that it was subrogated in the insured’s position. It was argued before the Court that a right to sue cannot be transferred under Section 6(e) of the Transfer of Property Act44. It was argued that an assignment was necessary to sustain a claim of subrogation. The Court clearly noted in paragraph 3 of the judgment that there was 38

KSN Murthy KVS Sarma, Modern Law Of Insurance In India (Lexis Nexis 2013) 143. Ibid. 40 D. BOSE, A TEXT BOOK OF EQUITY (6th ed.). 39

41

Prashanti Upadhyay, ‘Development of Laws Relating To Marine Insurance In India’, Manupatra

42

See Alam Ali v. Beni Charan, AIR 1936 All. 33 (F.B.).

43

Vasudev Mudaliar v Caledonian Insurance Co., AIR 1965 Mad 159.

44

Section 6(e), Transfer of Property Act, 1882.

a paucity of precedent in this context and based the judgment on English Law. Similar to the line of reasoning used in Castellain and Tibbitts, the Court first found that a contract of motor insurance is a contract of indemnity. It then, held that the insurer in such contracts are entitled to the right of subrogation. The Court held that the right of subrogation are an exception to the general rule that a right to sue for tort is non-assignable. It held that the insurer in this case was entitled to sue in his own name. UNION OF INDIA V SRI SARADA MILLS

In Union of India v Sri Sarada Mills45, the Supreme Court had to consider the nature of subrogation and the manner in which it is to be exercised. In the said case, the insured respondent recovered a certain sum from the insurer and assigned all their rights against the railway administration to the insurer. The question was whether the insurer can bring an independent suit in its own name without reference to the insured in the action. The Court considered whether the letter of subrogation in the given case also assigned a right to sue to the insurer. In such a case, the insurer can sue in his own name, however, such an assignment by itself would be bad in law. However, the Court found that this was not in issue as there was no enforcement sought for assignment. The Majority opinion in the case found that the insurer had a right to sue in its name. Matthew J., however, dissented on this point and distinguished Vasudeva. It held that Vasudeva was correct in noting that the right of subrogation does not ipso jure enable an insurer to bring a suit in his name. However, he found that Vasudeva was incorrect in stating that subrogation is an exception to Section 6(e) of Transfer of Property Act, 1882. ECONOMIC TRANSPORT V CHARAN SPINNING MILLS The Supreme Court had the chance to revisit the issue in Economic Transport Organization v. Charan Spinning Mills.46 The Court held that— I.

Equitable right of subrogation arises when the insurer settles the claim of the assured,

45

Union of India v Sri Sarada Mills, AIR 1973 SC 281.

46

Economic Transport Organization v. Charan Spinning Mills, 2010 (2) SCALE 427.

for the entire loss. When there is an equitable subrogation in favour of the insurer, the insurer is allowed to stand in the shoes of the assured and enforce the rights of the assured against the wrong doer. II.

Subrogation does not terminate nor puts an end to the right of the assured to sue the wrong-doer and recover the damages for the loss. Subrogation only entitles the insurer to receive back the amount paid to the assured, in terms of the principles of subrogation.

III.

Where the assured executes a letter of subrogation, reducing the terms of subrogation, the rights of the insurer vis-a-vis the assured will be governed by the terms of the letter of subrogation.

IV.

A subrogation enables the insurer to exercise the rights of the assured against third parties in the name of the assured. Consequently, any plaint, complaint or petition for recovery of compensation can be filed in the name of the assured, or by the assured represented by the insurer as subrogee-cum- attorney, or by the assured and the insurer as co-plaintiffs or co- complainants

V.

Where the assured executed a subrogation-cum- assignment in favour of the insurer (as contrasted from a subrogation), the assured is left with no right or interest. Consequently, the assured will no longer be entitled to sue the wrong-doer on its own account and for its own benefit.

CONCLUSION

In this project we demonstrated the clear dichotomy between the formulation of the doctrine of subrogation in Simpson and Castellain. We submitted that the formulation in Castellain is not how the doctrine has been historically understood. The Castellain formulation conflates the technical meaning of subrogation with principles of equity and although justice is meted by such an application, it creates considerable difficulty in understanding the concept. We demonstrated the application of the Castellain formulation as well. In the Indian context, however, the doctrine has been examined from a very different perspective. The controversy in this area has been whether subrogation is an assignment of a right to sue. This is due to the statutory framework in India which prohibits assignment of a right to sue for tort. The cases discussed above deal with this aspect thoroughly and the five- judge bench judgment in Economic Transport Organization is authoritative in this aspect. However, the cases do not discuss the application of the doctrine in terms of how Castellain does. It is thus, unclear as to the extent of the doctrine of subrogation applicable in India and it is uncertain whether the doctrine entitles insurers to equitable remedies under the Castellain formulation.47

Rahul Pandey, ‘Doctrine of Equitable Subrogation in Indian Law’,Mondaq, . 47