Profits in Subrogation: An Insurer's Claim to Be More Than Indemnified
![handle is hein.journals/byulr1979 and id is 155 raw text is: Profits in Subrogation: An Insurer's Claim to Be
More than Indemnified
I. INTRODUCTION
[I]f the assured is not entitled to retain an excess against
the insurer, and the insurer . . . is not entitled to receive the
excess from the assured, what happens to the excess?' This ques-
tion, posed by Lord Justice Megaw in L. Lucas Ltd. v. Export
Credits Guarantee Department,' is bred by the juxtaposition of
two subrogation rules. The right to subrogation, being in nature
like restitution, entitles the holder of the right only to reimburse-
ment3 and, under a contract of insurance, the assured. . . shall
be fully indemnified, but shall never be more than fully indemni-
fied. The confusion that distribution of windfall profits in sub-
rogation has brought to American and English courts derives
from both the difficulty of the question and its rarity. Because
insurance agreements are contracts of indemnity, the issue of
which party is entitled to any possible excess once both insurer
and insured have been indemnified has seldom been litigated.
This Comment will evaluate a subrogee's right to recover
more than it paid to the subrogor. The purpose of subrogation and
insurance will be outlined, focusing on those few recent cases in
England and the United States dealing with the profit-in-
subrogation issue. Next, this Comment will examine the circum-
stances under which a windfall might accrue to the insurer and
the possible justifications and consequences of such a windfall
award. A flexible approach for courts confronted with allocating
a windfall in an equitable subrogation suit will then be proposed.
Finally, the implications of choosing a flexible approach to wind-
falls in subrogation will be contrasted with the view that the
windfall be awarded strictly to either the insured or the insurer.
I. PRICIPLEs OF SUBROGATION5
A. Subrogation as Restitution
When the condition upon which an insurance contract is
1. L. Lucas Ltd. v. Export Credits Guar. Dep't, [1973] 2 All E.R. 984, 990-91 (C.A.),
rev'd on other grounds, [1974] 2 All E.R. 889 (H.L.).
2. Id.
3. See Memphis & L.R.R.R. v. Dow, 120 U.S. 287, 302 (1887).
4. Castellain v. Preston, 11 Q.B.D. 380, 386 (1883).
5. Subrogation has been defined as](ViewImageLocal?handle=hein.journals/byulr1979&div=13&collection=&method=preview&ext=.png&size=3)
What Is HeinOnline?
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Profits in Subrogation: An Insurer's Claim to Be More Than Indemnified
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most