Philip Bambagiotti sees boon for insurance companies from subrogation

25th April 2023

3PB's dual UK-Australia qualified barrister Philip BambagiottiPhilip BambagiottiCall: 2018 (pictured here), who specialises in construction and buildings defects and arbitration, has issued a new ‘thumbnail’ guide for insurers and their insureds about how a well-managed subrogation strategy can help to realise the real value of insurance outlay by vigorously advancing, offsetting insurance claims.

In many cases, pay out of an insurance claim gives subrogated rights that can be pursued to offset the net outlay. Those subrogated rights are not the same as the assignment of the insured’s rights. By subrogation, the insurer can use rights that remain with the insured claimant, without assignment; accessing even rights that cannot be assigned such as ‘bare’ causes of action.

Consider a claim made upon insurance by a builder for breach of contract. The principles of subrogation allow the indemnifying insurer access to a wide range of claims that the insured builder might have against other people involved in the activity that gave rise to the claim. Those might be in contract, tort, statutory causes, restitution or other conceivable bases of claim. The insurer is not limited by the cause of action brought against the insured that led to the claim. It can even extend to using the insured builder’s entitlements for claim/indemnity on other insurance policies held.

Philip’s new short guide outlines some strategies and gives tips that can enhance the value of a subrogated recovery component of a policy book. These include:

• Including, and better using, ‘litigation clauses’ in insurance policies;
• Having procedures in place at the time of the claim (or even at the formation of the policy) to promote timely action to preserve a subrogated claim even before the claim is resolved;
• Establishing a strategy that can allow the insurer to recognise and exercise rights that may be subrogated in future, so that both the insured’s and the insurer’s interests in the offsetting claims are protected and preserved.

The procedures to protect and preserve subrogated claims can involve creating a separate dedicated team within the claims group, with the ability to ‘flag’ such claims at an early part of the claims stage, and to identify, track and document the evidence needed for subrogated recoveries.

Philip says that: "The careful, proactive management of subrogation rights and obligations is an exercise that, if properly are carefully undertaken, can both reduce net pay-out, increase profitability, and increase insureds' satisfaction with the insurance cover. Whist some parties may be in dire financial straits that may not apply to a wider range of targets of subrogated claims. This aspect will interest not only insurers, but also security holders, banks, and financiers."

He continues: "On a broader, interests of justice and community satisfaction perspective, a properly and maturely managed strategy for subrogation of claims serves a number of objectives. By shifting the focus from the liability of the insured to the liability of those that contributed to the loss, it generally serves to advance the tie between responsibility and liability."

To access a free copy of his guide, please click here.

Philip Bambagiotti has assisted on many subrogation claims for both insurers and their insureds. He can be contacted on [email protected]. To instruct him or ask about his availability, please email his clerk Joe Townsend on [email protected] or by calling him on 020 7583 8055.