Page 17 - Life Assurance

st the contract would tend to become an
instrument of fraud.

2- Another reason for subrogation is that it
may hold rates below that they would otherwise
be. In some lines (types) of insurance,
particularly liability, recoveries from negligent
parties through subrogation are substantial.

While no specific provision for subrogation
recoveries is made in the rate structure other
than through those provisions relating to
salvage, the rates would have to be higher if
such recoveries were not permitted.

3- A final reason for subrogation is that the
burden of loss is more nearly placed on the
shoulders of those responsible. The negligent
should not escape penalty because of the insurance
because of the insurance mechanism.

Subrogation does not normally exist in
lines where the principle of indemnity does not
apply, such as life insurance and most types of
health insurance. Also subrogation does not
give the insurance company the right to collect
against the insured, even if the insured is
negligent.

Thus, a homeowner who negligently, but
accidentally burns down the house while thawing
out a frozen water pipe with a blowtorch can
collect under a fire policy, but the insurer cannot

58 Life31/life/life 08