Insurance Law: Subrogation Principles

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Questions and Answers

What happens to the salvage of the subject matter in a total loss under the policy?

It reverts back to the insured

It is donated to charity

It is sold to reduce the losses (correct)

It is kept by the insurer

What type of contract is an insurance policy?

Quasi-contract

Express contract (correct)

Implied in fact

Implied in law

What is an example of an implied condition in an insurance policy?

Subrogation rights

Utmost good faith (correct)

Insurable interest

Proposal form

What is the purpose of the conditions listed in the policy and/or schedule?

To outline the procedures, warranties, and terms of the policy Signup and view all the answers

What is an example of an implied contract?

Going to a doctor for a physical Signup and view all the answers

When does the common law right of subrogation arise?

After the insurer has paid the insured claim Signup and view all the answers

What is the main purpose of the insurer exercising subrogation rights?

To recover the amount paid to the insured from the negligent third party Signup and view all the answers

What is required from the insured when the insurer exercises subrogation rights?

To provide all information and documentation required by the insurer Signup and view all the answers

What is an example of a situation where subrogation may arise from contract?

A loss covered under a specific contract, such as a money policy Signup and view all the answers

Why do insurers place a condition in the policy giving themselves subrogation rights?

To avoid problems arising from the common law right of subrogation Signup and view all the answers

What is the primary purpose of the insurer exercising subrogation rights?

To mitigate the insurer's losses Signup and view all the answers

What is the significance of an implied contract in an insurance policy?

It is a term that is not explicitly stated but is understood by the parties involved Signup and view all the answers

What is the consequence of the insured not complying with the conditions of the insurance policy?

The insurer will deny the claim Signup and view all the answers

What is the difference between an express contract and an implied contract?

An express contract has all terms expressed, while an implied contract has some terms not expressed Signup and view all the answers

What is the role of utmost good faith in an insurance policy?

It is a principle that guides the behavior of the insured and the insurer Signup and view all the answers

Study Notes

Subrogation Rights

Subrogation is the right of one person to stand in the place of another and avail themselves to all the rights and remedies of that other.
Insurers exercise subrogation rights after indemnifying a person, allowing them to claim from any negligent third party.
The insured must assist the insurer in providing all information and documentation required to exercise subrogation rights.

Conditions of Insurance Policy

Policies have express conditions listed in the proposal form, policy, and/or schedule.
Express conditions include procedures, warranties, and terms.
The insured must comply with these conditions.
Apart from express conditions, there are also implied conditions that the insured must comply with.

Implied Conditions

Implied conditions are not written in the policy but are part of the insurance policy.
Examples of implied conditions include utmost good faith and insurable interest.
Implied contracts can be either implied in fact or implied in law.

Implied Contracts

An implied contract is one in which some of the terms are not expressed in words.
An implied contract can be implied in fact or implied in law.
A contract implied in fact is one in which the circumstances imply that parties have reached an agreement, even though they have not done so expressly.

Salvage of Subject Matter

For a loss covered under the policy, the salvage of the subject matter is considered exercising subrogation rights.
Once the insurer makes a total loss payment, the insurer will be entitled to the salvage, which can be sold to reduce the losses.

Subrogation Arising From

Subrogation may arise from tort, contract, or statute.
Examples of subrogation arising from tort include an act of negligence covered by the insured's liability policy.
Examples of subrogation arising from contract include a loss covered under a specific contract, such as a money policy.
Examples of subrogation arising from statute include a loss covered under the insured policy as well as under statute requirement.

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Description

Test your understanding of subrogation, a principle in insurance law that allows insurers to exercise the rights of the insured to claim from a negligent third party. Learn about the rights and remedies of subrogation and the responsibilities of the insured.