What is the Right of Subrogation in Insurance Business

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Mr. Ade insured his car with ABC Insurance company against theft and insured his house at Ikoyi against fire and burglary .

On 1st of January, Mr. Kola negligently set fire on Mr. Ade’s car. While on 2nd of March, Mr. Bayo, who was Mr. Ade’s neighbor at Ikoyi, was burning refuse, the fire spread and burnt Mr. Ade’s house. On 12th of January, ABC Insurance company paid Mr. Ade #1 million for his house and #200,000 for his car. Mr. Bayo promise to pay Mr. Ade #3 million to buy another house while Mr. Kola’s insurance company paid Mr. Ade #550,000 to buy another car. What is the extent of ABC Insurance company right in the exercise of the right of subrogation?

The right of subrogation is a right conferred on an insurance company (also known as the insurer) to exercise after claim of insurance settlement where it stepped into the shoes of the insured and enjoys the rights and privileges which was due to an insured from a third party.

This right is not automatic for the insurer as there are certain requirement which must be fulfilled. The insurance company must, firstly, accept liability over the damage suffered and must have compensated the insured. If the insurance company refuse liability, it can exercise the right of subrogation. Secondly, the loss suffered must be connected to the loss insured.

The extent of an insurance company’s right in the exercise of the right of subrogation are

1. The insurance company is not excused from performing its contractual obligation of indemnifying the insured for the loss suffered even where the Third party tortfeasor also has liability for the loss that occurred.
2. Before the insurance company can exercise the right of subrogation, he must have accepted liability over the damage suffered and must have compensated the insured unless both parties agreed otherwise.
3. The insurer can only claim only the amount he has paid the insured as compensation for the damage suffered.it cannot claim extra monies even where money is gotten from the third party was in excess
4. Also where the insured conduct himself in a manner that is detrimental to the insurance company’s interest, the insurance company can institute an action against the insured to seek for remedy.
   Therefore,Mr. Ade can claim from both ABS insurance company and Mr. Kola and Mr. Bayo .However Mr. Ade is to reimburse ABC insurance company for the amount they have paid to indemnify him of his loss.