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Chapter 8 Contribution and subrogation 8/9

F Precluded subrogation rights

There are some situations in which insurers are barred from exercising subrogation rights, or where they
Insurers can be
agree not to exercise them. barred from
exercising
subrogation rights
F1 Policyholder has no rights
The insurer’s right to subrogate relies on the fact that the policyholder has rights against a negligent
third party. In circumstances where these rights are waived the insurer cannot re-acquire them. This
could happen if a policyholder signs an agreement with a ‘hold harmless’ clause; this is a provision
where one or both parties agree not to hold the other party responsible for any loss, damage or legal
liability which prevents the insured from pursuing recovery rights,

F2 Benefit policies

As we have established, certain policies, such as personal accident policies, are benefit policies. This
means that they are not subject to the rules that flow from the principle of indemnity. It follows that even
if a person negligently causes an accident in which the insured person is injured, the personal accident
insurer will have no right of recovery. This is true even if the policyholder successfully sues the negligent
third party and receives financial compensation for the injuries, in which case they are entitled to keep
both the personal accident benefits and the court award.

F3 Subrogation waiver

There are circumstances in which insurers agree to waive their rights of subrogation. They do this
through subrogation waiver clauses, which are common in commercial insurance. These clauses are
usually designed to prevent the insurer from pursuing any subrogation rights it may have against a
parent or subsidiary company of the policyholder.

F4 Negligent fellow employees Reference copy for CII Face to Face Training

Insurers took the decision not to pursue their recovery rights against negligent fellow workers as a result
of a court case, Lister v. Romford Ice and Cold Storage Ltd (1957). The details of this case are that a son
injured his father in the course of his employment (they were fellow workers). The insurers paid out for
the father’s injuries under the employer’s liability policy. They then successfully recovered their outlay
from the son (because his father’s injuries were the result of a lack of reasonable care on his part). There
was criticism of the insurance industry and a general feeling that this was harsh. Insurers have,
therefore, generally agreed (except in extreme circumstances) not to pursue recovery rights against
negligent fellow workers. Chapter

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