Scope of an insurer’s subrogation rights

An insurer’s right of subrogation entitles him to rely upon all of the assured’s rights as against the third party in pursuing the claim against the third party. The question in Sousa v London Borough of Waltham Forest [2010] EW Misc 1 (EWCC) was whether an assured who had been instructed by insurers to pursue a claim against the third party on the basis of a conditional fee agreement with solicitors had acted reasonably in entering into that agreement so as to render the third party liable by way of costs for the amount of the success fee. HHJ Behrens QC had no doubt that this was the case.

Sousa: the facts

Mr Sousa was insured under a policy issued by Virgin Insurance against damage to his property. The property suffered subsistence damage caused by the roots of a tree owned by the defendant local authority. Mr Sousa claimed from the insurers, and they indemnified him for his loss, subject to the £1,000 excess which Mr Sousa had to bear for such loss. It is settled law that the amount of any excess is to be disregarded in determining whether the assured has been fully indemnified under the policy, and accordingly on payment the insurers had a right of subrogation against the defendant.