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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE
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Subrogation refers to the substitution of one person in place of another with reference to a lawful claim or right.
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The insurer, as the new creditor, assumes the old creditor’s right to go after the debtor, without the need of any contract.
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The insurer is subrogated only to the extent of the amount paid.
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If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party may recover the deficiency from the person causing the loss or injury.
Subrogation refers to the substitution of one person in place of another with reference to a lawful claim or right, so that he who is substituted success to the rights of the other in relation to a debt or claim, including its remedies or securities.
The law says:
Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. (Article 2207, New Civil Code)
In insurance, subrogation may exist if (1) the insurance involved is property insurance; (2) there is loss arising from the risk insured against; (3) the insured receives indemnity from the insurer for the loss; and (4) the indemnity is covered by the face value of the policy.
The insurer, as the new creditor, assumes the old creditor’s right to go after the debtor, without the need of any contract.
The insurer is subrogated only to the extent of the amount paid. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party may recover the deficiency from the person causing the loss or injury.
Jurisprudence says:
“Subrogation under Article 2207 of the Civil Code only allows the insurer, as a new creditor who assumes ipso jure the old creditor’s rights without the need of any contract, to go after the debtor. [But] this does not mean that a new obligation is created between the debtor and the insurer. The insurer, as a new creditor, remains bound by the limitations of the old creditor’s claims against the debtor, which includes, among others, the aspect of prescription.” (Filcon Ready Mixed, Inc. v. UCPB General Insurance Company, Inc., G.R. No. 229877, July 15, 2020)
As held in the case of Lorenzo Shipping Lines v. Chubb and Sons, Inc. (G.R. No. 147724, June 08, 2004), the incapacity of the insured will not affect the capacity of the subrogee because capacity is personal to the holder.
Jurisprudence says:
“Subrogation refers to the substitution of one person in place of another with reference to a lawful claim or right, so that he who is substituted success to the rights of the other in relation to a debt or claim, including its remedies or securities.” (Lorenzo Shipping Lines v. Chubb and Sons, Inc., G.R. No. 147724, June 08, 2004)
The Supreme Court ruled in the case of Keihin-Everett Forwarding Co., Inc. v. Tokio Marine Malayan Insurance Co., Inc. (G.R. No. 212107, January 28, 2019) that:
“The payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies which the insured may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of any privity of contract or upon payment by the insurance company of the insurance claim. It accrues simply upon payment by the insurance company of the insurance claim.”
Further, the Supreme Court in the same case held that the right of subrogation is founded on equity. To wit:
“Indeed, the right of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice and good conscience, ought to pay.” (Keihin-Everett Forwarding Co., Inc. v. Tokio Marine Malayan Insurance Co., Inc., G.R. No. 212107, January 28, 2019)
Related article: Understanding the doctrine of subrogation in insurance
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