Contribution

The principle of Subrogation, similar to contribution, is often mentioned as being a corollary of indemnity. It involves one person, usually the insurer taking over the rights of another, usually the insured.

Most policy documents will include a subrogation clause or condition. This will state that the insurer has the right to take over and conduct the defence or settlement of any claim at their discretion.

Essentially if the insurer has paid a claim to its insured, thereby indemnifying them and fulfilling the contract, it then has the right to pursue any recovery opportunity.

Of course, in common law, an injured party has the right to claim for injury or damages from the person who caused the damage. Without the subrogation clause, the insured could claim through their insurance and then pursue their legal rights. This could mean they were paid twice, which of course is contrary to the principle of indemnity.

Here is an example:

• You take your car for a service. While it is in the garage a young, inexperienced mechanic manages to set it alight, causing it to be completely destroyed. In common law, you would have the right to claim damages from the garage for their negligence.
  
• However, if you have motor insurance covering such damage you can choose to claim from your motor insurance or pursue the garage direct. If you choose to use your motor insurance, your insurer would pay your claim and then step into your shoes to claim your rights of recovery from the garage.
  
• If your insurer is successful they keep the money to offset their costs. If your insurer also agrees to recover your policy excess, this is returned to you.