Subrogation is The concept of subrogation in insurance

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

One of the integral and most important elements of insurance is the so-called subrogation institution. Surprisingly, despite the fact that subrogation is not a new phenomenon, known even to Roman law, in modern society, however, not every person understands and can explain its essence. For most, this remains a secret behind seven locks. Ignorance, and sometimes unwillingness to get acquainted with the basic terminology, banal frivolity can eventually lead to the fact that the insurer with whom the contract is concluded refuses to compensate for damage caused to the property of the insured by a third party. Moreover, cases are quite common when, due to their legal illiteracy, the beneficiary is forced to independently pay for the damage caused. Therefore, in order to protect yourself from such troubles, you need to know the basics of insurance and be able to protect your rights in any situation.

Institute of subrogation: interpretation of the concept and legal essence

The term "subrogation" first appeared in ancient Rome and comes from lat. the words subrogare / subrogatio, which means “replace, replenish”. According to ancient sources, this is a case of assignment of rights (i.e., a transaction that implies that one of the parties transfers to the other the right to require certain third parties to fulfill certain obligations). Later, the concept of subrogation was borrowed by the national systems of France, England, Germany, the USA and other countries. The father of insurance law is the Englishman Mansfield, who argues that subrogation is a means that makes it impossible for the insured to enrich himself through double payments: first at the expense of the insurer, and then - thanks to the person responsible for causing property damage.

In the US, this right has been recognized since colonial times and meant nothing more than the replacement of the beneficiary by the insurance company in actions directed against a third party.

In the Russian Federation, subrogation is regulated by article 965 of the Civil Code, as well as article 281 of the CTM.

Subrogation is…

Using legal terminology, it is quite difficult for the layman to understand the essence of this phenomenon. What it is is much easier to explain with concrete examples.

Let's say you overslept and are late for work. Jumping out of bed, you got dressed, grabbed your car keys from the bedside table and rushed out of the house. Maneuvering on the track during the morning rush hour among hundreds of other vehicles, you have an accident. Fortunately, you have CASCO insurance, and the insurance company has covered all the repair costs. However, after analyzing the accident, it was found thatyou are not the culprit at all, but the driver of the second car involved in the incident. In addition, the true culprit of the accident has its own insurer. In this case, your insurance company has the right to require the company representing the interests of the culprit to reimburse it in full for all costs.

Thus, subrogation is the right by which the insurance company can require the person responsible for the accident to reimburse the costs incurred under the terms of the contract concluded with the client. The main rule is that as soon as the insurer has fulfilled its contractual obligations to you, it has a legal and reasonable right to demand from the insurance company the culprit of the accident or personally from him to compensate for all losses.

What to do if you are the culprit of the accident?

If you provoked an accident, but the other person is only partially to blame for the damage caused, you will only have to be responsible for the damage caused to the car through your fault. The victim's insurer will probably not miss the opportunity to exercise the right of subrogation and recover from you or your insurance company all the costs incurred by him. If your car was not insured, it would be wise to seek the help of a lawyer.

What does the right of subrogation imply?

Above we tried to understand what subrogation is. In insurance, there is also such a thing as the “right of subrogation”. What does it mean? This right (subrogation of the insurer) arises onlyafter the company has paid the insurance indemnity. Until now, she has no such right. In addition, it should be noted that the insurer cannot claim for an amount exceeding the amount of the payment made. It is also necessary to remember that the right to demand only what the victim (insured) possessed at the time of causing damage to him passes to the insurance company. In other words, depreciation of property is taken into account. For example, if the age of the car is 10 years, and during the repair the old parts were replaced with new ones, then the culprit of the accident can be required to reimburse the costs not for the full cost of the repair, but only for the cost of the parts that became unusable and were subject to replacement as a result of the accident. car accident. Thus, the insurer, as well as the victim, may demand reimbursement of costs only taking into account the depreciation of the insured property.

Is the right to subrogation different from the right to exercise subrogation?

Indeed, the concepts of "the right to subrogation" and "the right to implement subrogation" are not identical. They differ from each other in the same way as different types of insurance.

The fact is that the process of exercising the right to subrogation consists of two main stages. At the first stage, the insurer takes measures that will subsequently lead to the emergence of his right to subrogation. To do this, the insurance company only needs to provide for the appropriate clause in the contract.

At the second stage, there isthe practical realization of the right to subrogation, which arises only after the payment of compensation to the beneficiary. Until that time, this right belongs to the insured. Therefore, one should clearly distinguish the right to subrogation, which arises from the moment the insurer and the beneficiary sign the contract, from the right to exercise subrogation, which appears only after the full payment of compensation for losses.

Subrogation and right of regression

In Russian legislation, in addition to the concept of subrogation, there is another legal structure similar in meaning, known as the right of regressive claim, provided for in Article 14 of the OSAGO Law. The similarity of these two concepts is as follows:

• Firstly, subrogation is a right that performs an educational function, which consists in imposing civil liability on the person who caused property damage. The same can be said about the insurer's recourse claim.
• Secondly, both subrogation and regression involve 3 parties - the victim (the insured), the one who caused the harm, as well as the party that compensated the harm (the insurer).

However, there is also a difference between subrogation and regression, which lies in the fact that a new obligation does not arise during subrogation, but vice versa during regression.

Is there a statute of limitations on subrogation?

Certainly, and it is 3 years, starting immediately from the time the damage was done. Due to ignorance of the law, many people find themselves in a rather sensitive situation and reimbursedamage twice. For example, immediately after an accident that you provoked, you agree with the injured party to compensate her for the damage on the spot. At the same time, it did not occur to you to require a receipt for the transfer of money. However, this seems to be not enough for the savvy victim. He goes to his insurance company, keeps silent about your arrangement, and receives an insurance payment. Naturally, after that, the insurer, in the order of subrogation, sues you. If you fail to produce a receipt in court, the court will rule in favor of the insurance company.

But the insurers themselves do not always act honestly and legally. Knowing about the statute of limitations, they may still try to sue you in the hope that you have no idea about the three-year validity of this right. And indeed, if you do not know about it, the court, most likely, you will lose.

What types of insurance can we talk about, implying subrogation?

Initially, it must be emphasized that the right to subrogation appears only on the basis of a property insurance contract. It does not apply to personal insurance (human life, he alth).

So, analyzing the topic of subrogation, the following main types of insurance should be noted: OSAGO, CASCO, DSAGO.

Be vigilant! Know your rights and feel free to defend them!