Subrogation Rights: No Absolution On Dissolution

The case for an

assignment clause

The court held that where

an insured company is dissolved before subrogated proceedings can be started by

an insurer in the company's name the insurer's right to subrogate does not

amount to a sufficient proprietary interest to enable the insurer to get a

vesting order enabling the claim to be pursued.

The High Court has

considered whether an insurer can apply to have an insured's right of action

vested in the insurer following dissolution of the insured. Insurers had

indemnified the insured engineering company in respect of losses allegedly

caused by a sub-contractor. The insured and the liquidators had previously

disclaimed the right of action against the sub-contractor.

The case underlines the

advisability of insurers not only recording their rights of subrogation in the

policy but also stipulating that insurers have a right to insist on an

assignment of any cause of action that the insured might have against a third

party in respect of the loss in respect of which payment is made. Although it

may be impossible to enforce the obligation to assign if left until after

liquidation, a clause of this sort does improve the prospect of the insurer

taking steps to safeguard his position if the financial position or continued

existence of the insured is unclear.

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The case for an assignment

clause.

The court held that where an

insured company is dissolved before subrogated proceedings can be started by an

insurer in the company's name the insurer's right to subrogate does not amount

to a sufficient proprietary interest to enable the insurer to get a vesting

order enabling the claim to be pursued.

The High Court has

considered whether an insurer can apply to have an insured's right of action

vested in the insurer following dissolution of the insured. Insurers had

indemnified the insured engineering company in respect of losses allegedly

caused by a sub-contractor. The insured and the liquidators had previously

disclaimed the right of action against the sub-contractor.

The case underlines the

advisability of insurers not only recording their rights of subrogation in the

policy but also stipulating that insurers have a right to insist on an

assignment of any cause of action that the insured might have against a third

party in respect of the loss in respect of which payment is made. Although it

may be impossible to enforce the obligation to assign if...