An Analytical Review of the Doctrines of Subrogation and Abandonment in the Law of Marine Insurance

University essay from Lunds universitet/Juridiska institutionen

Abstract: The problem of windfall has recently become more and more frequent in marine insurance. The solution to the problem would affect both international business and the insurance industry. The Marine Insurance Act 1906 has not specified clearly about the solution; relevant English cases seem to render different decisions as to the payment recovered from the third party. The problem is caused by the confusion between abandonment and subrogation. It is also caused by the confusion between the remedies from the third party and the proprietary interest of the subject-matter itself.

In order to solve the problem, it starts firsly with the differences between the total loss and partial loss. Differences between the constructive total loss and actual total loss should be also examined. Their preconditions, the causes, and the consequences should be included in the study.

It then goes on with the differences between subrogation and rights arising from abandonmnet. The parital loss and total loss can lead to the subrogation rights. At the same time, the abandonment can only be caused by the constructive total loss. In addition, subrogation arises upon payment and abandonment arises upon the insurer’s acceptance of the notice of abandonment. Finally, after the loss, there are two main kinds of rights, the salvage and rights against the third wrongdoer. The subrogation right refers to the former and abandonment refers to the latter. Upon subrogation, the insurer can only get what he had paid for and the assured can get the amount exceeding the insured loss in the policy. Upon abandonment, the insurer can get more than what he has paid for through the proprietary interest of the subject-matter’s remains, namely the salvage.

The solution to the windfall problem is a good illustration as to the difference between subrogation and abandonment in marine insurance. The Chinese law can get some inspiration from those significant points from the problem resolution in the English law.

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