Litigation funding

The basis of subrogation is that the insurance position of the claimant in legal proceedings is to be disregarded. It is not, therefore, open to a defendant to assert that the claim against him should be dismissed because the claimant has not suffered any loss by reason of indemnification by his insurers. In Sousa v London Borough of Waltham Forest Council [2011] EWCA Civ 194 the Court of Appeal held that the same principle should apply to litigation funding mechanisms adopted by the insurers: the matter is to be looked at as if the insurers were not involved.

Sousa: the facts

Mr Sousa was insured by a householder’s policy, underwritten by Virgin Insurance, against damage to his house. Tree roots affected the foundations of Mr Sousa’s house, and he made a claim against the insurers who duly indemnified him. Virgin then sought to exercise subrogation rights to recover its payment from the defendant council which was responsible for the trees.