The insurer has a right to claim from the wrongdoer or third party
The doctrine of subrogation is defined in Joubert (ed) The Law of South Africa vol 12 (first re-issue) para 373 as follows:
'Subrogation as a doctrine of insurance law embraces a set of rules providing for the reimbursement of an insurer which has indemnified its insured under a contract of indemnity insurance. The gist of the doctrine is the insurer's personal right of recourse against its insured, in terms of which it is entitled to reimburse itself out of the proceeds of any claims that the insured may have against third parties in respect of the loss.'
Typically, an insurer covers the insured for a certain eventuality, i.e., a motor vehicle collision/ accident. Upon occurrence of such eventuality, an insurer would indemnify its insured, however it does not end there, the insurer in turn is subrogated to the rights of the insured, which essentially means that, the insurer has the personal right to claim nor recover its loss (pay-out to the insured) thereby instituting legal proceedings against the wrongdoer. The wrongdoer in this instance, would be the person who is the cause of the motor vehicle collision. Whether or not the insurer exercises this right against the third party is totally at its discretion.
In Caledonia North Sea Ltd v Bridge Engineering Co. and other (2000) Lloyd Rep 1R 249 at 261: it was held that, the right of subrogation can be exercised against a primary debtor whether the latter is a delictual wrongdoer or a contractual defaulter.
The general rule is that the insurer will only be entitled to rights of subrogation once the insured has been indemnified "in full" for its insured loss. On payment of indemnity, subrogation happens without the need for any formalities, however the following are considered the legal requirements for subrogation:
- The existence of a valid insurance contract;
- The insurer must have indemnified the insured;
- The insured's loss must have been fully compensated;
- The insured must have a right against a third party that must be liable to subrogation which arises in the context of indemnity insurance.
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