Subrogation: allocation of subrogation recoveries

The principle of subrogation operates to remove the possibility of an assured receiving more than an indemnity from a combination of insurance policy payments and sums recovered from a third party. However, the assured is entitled to an indemnity for uninsured losses from any third party recovery. In Small Business Consortium Lloyd’s Consortium No 9056 v Angas Securities Ltd [2015] NSWSC 1511, a decision of Ball J in the New South Wales Supreme Court, it was held that the ordinary rule had been reversed by the wording of the policy, and that the assured had to account to the insurers from the sums received from a third party for the amount of their payment, even though the assured was left with uninsured loss.

There is also some interesting discussion of the scope of an insurer’s duty of utmost good faith, now of particular interest in England given the amendment of section 17 of the Marine Insurance Act 1906 by the Insurance Act 2015 and opening the way to the argument that the duty might have some direct contractual effect.