Lord Napier and Ettrick v Hunter
An insurer who has paid a claim is entitled, by subrogation, to an equitable proprietary right over damages later recovered by the insured from a third party in respect of the insured loss.
Facts
Lloyd's names, who had suffered heavy losses on their underwriting, were insured under stop loss policies, which indemnified them for losses above a certain level. The names later received damages from their managing agents, whose negligence had caused the losses, in a settlement. The question was whether the stop loss insurers, who had paid the names, were entitled to share in the damages, and whether they had a proprietary interest in the damages held by the names' solicitors.
Legal principle
The House of Lords held that the insurers were entitled to recover from the damages the amounts they had paid, by way of subrogation, and that they had an equitable proprietary interest in the damages, in the form of an equitable lien or charge, enforceable against the fund in the hands of the names' solicitors. Lord Templeman said that the insured must not recover more than a full indemnity, and that equity will intervene to protect the insurer's rights. The insured must first be fully indemnified for his loss, including the amount of any excess, before the insurer is entitled to recover. The case is the leading authority on the proprietary nature of the insurer's right of subrogation.
Related cases on coverage, causation, claims and subrogation
- Agapitos v Agnew (The Aegeon) [2002] EWCA Civ 247, [2003] QB 556
- Castellain v Preston (1883) 11 QBD 380
- Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1, [2021] AC 649
- Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyd's Rep IR 209
- Global Process Systems Inc v Syarikat Takaful Malaysia Berhad (The Cendor Mopu) [2011] UKSC 5
- Gray v Barr [1971] 2 QB 554
- Lexington Insurance Co v AGF Insurance Ltd [2009] UKHL 40, [2010] 1 AC 180
- Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350
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