The term “risk” denotes the possibility of meeting or being exposed to a peril, which may result in one suffering harm or loss, whether patrimonial or non-patrimonial (sentimental loss). For insurance purposes, risk arises when the individual who is allegedly at risk desires to avert the risk and has an interest in the non-occurrence of the danger at hand.
Risks yield insecurity. Consequently, people will naturally seek to procure some form of security, both financial and non-financial, to guard against the perils threatening their daily existence. One way of attaining such security is concluding a contract of insurance with an insurance company or a financial institution. This will require one to make monthly payments towards the premiums as outlined in the insurance policy. The amount of the premium will be dependent on a number of factors. This should be established with the insurer prior to the acceptance of the policy. The insurer will accept the risk (loss or harm) on behalf of the insured if the uncertain event or peril materialises.
It is prudent to caution that although the insured suffers the loss or harm as a result of the actions of a wrongdoer, once the insurer makes good the loss suffered by the insured in the collision or accident (for instance) by incurring the full costs of repairing the motor vehicle in the stead of the insured, the insured will cease to retain the right to bring a claim for the amount of the loss or harm suffered, from the third party. Put differently, if an insurer accepts the owner/insured’s claim and repairs the damaged vehicle, or with regard to a vehicle that is uneconomical to repair, gives value for the vehicle at the time of the accident or collision, the insured will not be entitled to bring a separate claim for the costs of repair or value of the vehicle against the third party after the insured has been restored by the insurer to the position that the insured was in before the occurrence of the unexpected event. This will be the stance, unless the insurer confers the authority to do so on the insured in writing.
The Doctrine of Subrogation
As indicated above, when an insured indemnifiable event is wrongfully or negligently caused by a third party, the insured will be eligible for one of two claims in law. The first being the quickest route to recovery, in terms of which he or she can claim indemnification from his or her insurer, and secondly, he or she can claim from the person who caused the harm. Take the example of a motor vehicle collision which causes damage to the insured’s vehicle. If the car is insured in terms of a standard motor policy, a claim for indemnification can be lodged against that policy. The wrongdoer (third party) who wrongfully or negligently caused the loss or harm can also be sued. If this is the case, the insured would be doubly indemnified if he or she is successful in their claim against the wrongdoer and if he or she is simultaneously indemnified by the motor insurance (where the insurer pays out the amount of the claim).
However; double indemnity is a principle that is contrary to public policy, and as such, the insured will not be permitted to retain both payments. The insurer would be well within its rights to recover the amount paid out by the insurer to the insured. The recovery by the insurer is founded upon the doctrine of subrogation. Subrogation is innately a consequence of indemnity as portrayed above. It may give rise to an action against the insured, and not just the third party as illustrated in the preceding examples. Henceforth, insurers have gravitated towards inserting a term in insurance policies to make provision for subrogation, which requires insurers to recover from third parties, if requested by the insurer. A claim in delict is not negated by the mere existence of insurance. In other words, the wrongdoer cannot raise the existence of an insurance policy between the insured and the insurer as a defence to an action brought against such a third party.
As it stands in South African Law, insurers are at liberty to sue third parties in their own names as opposed to that of the insured, according to the doctrine of subrogation. Prior to the evolution of the law to that point, insurers could only sue third parties in the name of the insured.
It is important to take heed of the fact that once a claim for indemnification has be laid with one’s insurer and the insurer pays out the amount of the claim, one cannot subsequently claim the loss or harm suffered from a third party or wrongdoer, unless mandated to do so by and on behalf of the insurer. Nonetheless, the insured may claim any excess amounts, which may have been required by the insurer before the insurer paid out the amount of the claim, from the third party. The insured may sue in their own name in that regard. Subrogation is therefore, the transfer of the right to claim from the third party, which transfer takes place between the insured and the insurer. As stated above, the third party cannot interfere with the relationship between the insurer and the insured by claiming that they are protected from any claims arising from their wrongdoing as a result of the insurer having indemnified the insured against the indemnifiable event.
Reference List:
James A., Coquelle C., le Roux D. et al. (2009). Extension of Subrogation – Insurers Granted the Right to Sue in their Own Names.
http://www.webberwentzel.com/wwb/content/en/page148?oid=2469Lourens v Colonial Mutual Life Assurance Society Ltd 1986 3 SA 373 (A) 384D. See pars. 301-302 post.
Lake v Reinsurance Corporation Ltd 1967 3 All SA 225 (W); 1967 3 SA 124 (W) 127
Sydmore Engineering Works (Pty) Ltd v Fidelity Guards (Pty) Ltd 1972 1 All SA 127 (W); 1972 1 SA 478 (W) 480.
Scottish Union and National Insurance Co. v Davis 1970 1 Lloyd’s Law Report 1 CA.
Ackerman v Loubser 1918 OPD 21.