In most of our insurance policies, we have a requirement to assist the insurer when we make a claim. This means we must give the insurer all the information and assistance which the insurer reasonably needs, to handle our claim.

The insurer has the right to recover all amounts payable under our claim, from any other person who is responsible for the damage which is the subject of the claim and therefore we must co-operate with the insurer in any action which they are entitled to take.

This is referred to as subrogation and it applies to most contracts of insurance. Its purpose is to allow the insurer to ‘stand in the insured’s shoes’ or to assume the rights at law of the insured person to recover the loss.

In reality, suppose another driver runs a red light and your car suffers a total loss. You have insurance on your car and lodge an insurance claim. Your insurer pays you for the total loss of your car including any other expenses related to the accident. Your insurer will then seek reimbursement from the at-fault party or their insurer. Your insurer is “subrogated” to the rights under your policy and can “step in your shoes” to recover any amount paid out on your behalf. This is how subrogation works.

Subrogation is sometimes misunderstood and criticized, on the basis that payment under an insurance claim is simply a right, based upon the payment of the insurance premium, and a belief that they should also retain a right to exercise any claims arising from the insured event. The law simply does not allow this. Subrogation allows the insurer to proceed against third parties and recover their loss. It also operates to prevent over-recovery by the insured person; however it does not prevent the insured person from seeking to recover from the third party any loss which may not have been covered by their policy (e.g. the policy excess, or in the case of the example above, a baby pram which was in the boot and suffered loss in the accident), it is considered to form part of the general law of unjust enrichment (i.e. preventing a party by being unjustly enriched by pursuing a claim for a loss in respect of which they have already been indemnified).

Should any member of the ARQRV experience any difficulty in understanding the action of their insurer following a claim, please refer the matter to the ARQRV, as there should be a simple solution