Insurance guide - e.g. subrogation

UK Principles of Insurance - Subrogation example

The following are examples of the basic legal principles of insurance in practice - 'subrogation'.

If the insured's goods were destroyed in a fire that was caused by a third party. The insurance company would compensate the insured. They may then salvage any goods salvagable, and sue the third party for the difference, assuming the goods were fully indemified in the first place.

Subrogation - Two vessels collide at sea. The damaged vessel was insured for £4000, but the repairs cost £5000. Both vesels being equally guilty, the owners decide to share the cost of the repairs. The insurance company is only liable for £1500. The reason is that the maximum amount payable was £4000, but the insured had already been compensated to the extent of £2500, and the insurance company was only liable for the difference.

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