C&A Friedlander Attorneys

Following English law, South African Law recognises the right of an insurer to step into the shoes of its insured in proceedings against third parties who are liable for damages suffered by the insured. This procedural step, known as the doctrine of subrogation, allows the insurer to litigate against a third party in order to recover what it has paid to the insured in terms of the insurance contract. To rely on the doctrine of subrogation, the following requirements must be met:

  1. Firstly, a valid and enforceable contract must exist between the insurer and the insured.
  2. Secondly, the insurer must indemnify the insured in terms of the insurance contract by reimbursement of the damages suffered.
  3. Thirdly, the insured must have a right of recourse against the liable third party, which is susceptible to subrogation.

The first two requirements are satisfied once the insured has successfully relied on the insurance contract by submitting a valid claim and being reimbursed in full by the insurer. In respect of the third requirement, a third party who has either caused or contributed to the damages suffered, must be legally liable to compensate the insured for said damages. Once all three requirements are met, the insurer may institute proceedings against the liable third party. At this point, it is important to note that subrogation does not transfer the rights of the insured to the insurer, but rather allows the insurer to assume its rights, allowing it to exercise the insured’s rights of recourse as if it was the insured itself.

This has raised the question whether subrogation should be disclosed, pleaded and proved, or, whether the insurer should litigate in the name of the insured. In practice, it is generally accepted that subrogation litigation takes place in the name of the insured, meaning that the insured shall be cited as the plaintiff in the matter against the third-party defendant. Such practice was criticised by the Supreme Court of Appeal in Rand Mutual Assurance Co Ltd v Road Accident Fund 2008 (6) SA 511 (SCA) as an outdated practice that undermines the transparency of the proceedings, however, the court was reluctant to interfere with settled legal principles. Furthermore, it has not yet been held by our courts that the insurer is not entitled to litigate in its own name. The insurer therefore has a choice to cite itself or the insured as the plaintiff in subrogation litigation. Regardless of the choice, it has been suggested that litigating in the name of the insured should prevail as litigating in the name of the insurer will necessitate subrogation to be pleaded and proved to avoid an exception or special plea of locus standi.

In conclusion, if an insured suffers damages caused or contributed to by a liable third party and successfully recovers its loss from its insurer in terms of a valid insurance contract, the insurer may, through the doctrine of subrogation, recover payments made to the insured through litigating against the third party. The insurer has a choice to either litigate in its own name or in the name of the insured, where the latter is preferred to avoid pleading and proving subrogation and locus standi.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).