The presence of multiple payers in the case study has several implications on the management of insurance contracts requiring the invocation of the subrogation principle. Given that multiple sources of funds are involved in the processing of one claim, the probability of co-insurance arises. Indeed, two or more people can be insured under one policy, depending on the nature of the policy agreement in question. Typically, contracts that involve co-insurance cases are joint or composite agreements.
In the case study involved in this assessment, the insurance company pursued the travel agent and, due to exchange rate fluctuations, received £18,000 in payments, as opposed to the £15,000 that they initially used to settle the original claim. The presence of multiple payment agencies in the insurance contract raises questions regarding whether one insurance company that has used its resources to settle a claim can then exercise its subrogation rights against another insurance agency with whom they share a co-insurance plan to recover the amount of money used to settle the claim in the first place.
Some insurance contracts have a waiver of subrogation clause introduced in the contract to prevent insurance companies from pursuing this strategy. However, in the case highlighted above, the use of multiple payment avenues has several implications on the implementation of subrogation rights in the contract involving the travel insurance, claimant, and the insured. First, by law, the insurance company cannot recover £18,000 as opposed to the £15,000 they used to settle the claim from the travel insurance company because this amount of money was obtained through exchange rate fluctuations, meaning that they would profit from the loss. The main insurance law applicable to this case involves recoveries that are greater than the loss. Therefore, the insurer is not entitled to receive any amount of money other than what they paid to the policyholder.
In Yorkshire Insurance Co. Ltd v. Nesbit Shipping Co. Ltd (1962), a case was made where recovery appeared to be greater than the claim settlement because the insurance company paid £72,000 for the damage of a ship but sued the Canadian government for £75,000 due to the same loss. Due to exchange rate fluctuations and the devaluation of the pound in 1945, the sum awarded, when converted to Canadian dollars, amounted to £126,000. The court held that the insurance company was only entitled to £72,000 of the money because this was the original amount used to settle the claim. The surplus cash was transferred to the insured, thereby meaning that the insurance company lost earnings that could have been earned from the amount over the 13 years covering the life of the policy.
The main issue highlighted in the above case is the fact that an insurance company cannot recover settlement claims by way of subrogation for an amount greater than they used to make the settlement in the first place. Therefore, given that the amount of money offered by the travel insurance company (£18,000) was greater than the sum of money used to make the initial settlement (£15,000), the insurance company is only liable to recover £15,000 from the recovered amount and not £18,000. The same principle used in the Yorkshire and Nesbit case applies to the present case involving payments for bodily harm and injury because the disparities in the amount of money involved were all caused by the same factor – exchange rate fluctuations. Therefore, parallels can be drawn in both cases.
Comparatively, the policyholder is entitled to the £2,000 worth of holiday they received from the tourism agency. This payment is acceptable under the principle of voluntary payments made to injured parties, which should be the sole beneficiaries. If this is the case, the payments cannot be recovered through the principle of subrogation. Therefore, the policyholder is entitled to the gains accrued from the injuries suffered. The law allows such contracts of subrogation to occur because of the deliberate attempt to hold third parties accountable for actions that they cause to others. In other words, it prevents third-party entities, such as the tour company, from being vindicated simply because their clients have arranged to have insurance for specific risks that are associated with their operations. These third-party entities may have public liability insurers who could ultimately bear the losses reported. Therefore, the prevention of unjust treatment is a cardinal principle of indemnity that minimizes the possibility of the unjust enrichment of parties involved in an insurance contract.