Page 18 - Life Assurance
P. 18
ceed against the owner for compensation.
Otherwise, there would be little value in having
insurance.
It is not uncommon for an insurer to waive
rights of subrogation under certain
circumstance, where, by so doing, there is no
violation of the principle of indemnity. Suppose
that a manufacturer has agreed to hold a railroad
not liable for losses arising out of the maintenance
of a spur track that the railroad has placed on the
manufacturer's property.
In effect, the manufacturer has assumed legal
liability that would otherwise be the responsibility of
the railroad. Now assume that a spark from one of
the railroad's engines sets fire to the manufacturer's
building and the railroad is found to be negligent,
and hence legally liable for the ensuing damage.
The insurer will pay the loss, but under its rights of
subrogation will proceed against the railroad.
However, the manufacturer has previously agreed to
assume all losses arising out of the existence of the
spur track.
Therefore, any amount collected becomes the
ultimate liability of the manufacturer because of the
hold harmless agreement.
If this were not the case the manufacturer
would have been in the position of collecting for the
loss from the insurer but returning it to the railroad
because of the hold harmless agreement. Therefor,
the insurer will waive the subrogation clause in the
59 Life31/life/life 08
Otherwise, there would be little value in having
insurance.
It is not uncommon for an insurer to waive
rights of subrogation under certain
circumstance, where, by so doing, there is no
violation of the principle of indemnity. Suppose
that a manufacturer has agreed to hold a railroad
not liable for losses arising out of the maintenance
of a spur track that the railroad has placed on the
manufacturer's property.
In effect, the manufacturer has assumed legal
liability that would otherwise be the responsibility of
the railroad. Now assume that a spark from one of
the railroad's engines sets fire to the manufacturer's
building and the railroad is found to be negligent,
and hence legally liable for the ensuing damage.
The insurer will pay the loss, but under its rights of
subrogation will proceed against the railroad.
However, the manufacturer has previously agreed to
assume all losses arising out of the existence of the
spur track.
Therefore, any amount collected becomes the
ultimate liability of the manufacturer because of the
hold harmless agreement.
If this were not the case the manufacturer
would have been in the position of collecting for the
loss from the insurer but returning it to the railroad
because of the hold harmless agreement. Therefor,
the insurer will waive the subrogation clause in the
59 Life31/life/life 08