Page 16 - Life Assurance

/1 What do we mean by the Principle of
Subrogation?

The principle of subrogation grows out of
the principle of indemnity.

Under the principle of subrogation, one
who has indemnified another's loss is entitled to
recovery from liable third parties, if any, who are
responsible.

Thus, if Ahmed's negligently causes damage to
Mona's property, Mona's insurance company will
indemnify Mona to the extent of liability for Mona's
loss and then have the right to proceed against
Ahmed for any amounts it has paid out under
Mona's policy.

3/4/2 The Importance of the Principle :

1- One of the important reasons for
subrogation is to reinforce the principle of
indemnity (that is, to prevent the insured from
collecting more than the actual cash loss).

If Mona's insurer did not have the right of
subrogation, it would be possible for Mona to
recover from the policy and then recover again in a
legal action against Ahmed. In this Mona would
collect twice. It would be possible for Mona to
arrange an accident with Ahmed, collect twice, and
split the profit with Ahmed. A moral hazard would

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