Subrogation - Allocation of subrogation recoveries

England v Guardian Insurance Ltd [1992] 2 All ER (Comm) 481)

Although the application of the doctrine of subrogation to insurance contracts has been established for well over 300 years, many of the practical consequences still have to be worked out. A particular problem has arisen where sums have been recovered from a third party by either the assured or the insurer: questions remain over the amount that can be retained and the capacity in which the surplus is held, the latter becoming important in the event of the insolvency of the holder. The latest contribution to the learning on these matters is the detailed and lengthy judgment of His Honour Judge Thornton QC in England v Guardian Insurance Ltd [1999] 2 All ER (Comm) 481. The case also raises the question of whether an assured is entitled to any sums from the insurer over and above the amount insured, by way of additional damages. In the following account the facts are simplified so that the key substantive issues which emerged are more clearly apparent.