Extent of The Right of Subrogation in Insurance Law  

Sompo Insurance Singapore Pte Ltd v. Royal & Sun Alliance Insurance Plc [2021] SGGC 152

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Singapore Marine Insurance Act 1994 (which is based on English Marine Insurance Act 1906) s. 79(1) stipulates (emphasis added):

Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss.

The question in this case was: “does an insurer’s right of subrogation extend to the right to call upon a performance bond issued to the assured?”  

The facts can be summarised as follows: In December 2013, the Government of Singapore entered into a contract with Geometra for the transport of military cargo. It was a condition under the contract that Geometra would provide an unconditional performance bond for 5 % of the contract price. This was satisfied by Sompo issuing a bond in favour of the Government.

The Singapore Government also purchased an insurance policy from RSA with regard to this shipment against the risk of loss or damage to cargo. When the cargo was damaged during transport the Government sought and obtained indemnity for the loss from RSA, which then commenced a subrogated recovery action under s. 79(1) of the Act and called on the performance bond issued by Sompo. To this end, RSA’s lawyers wrote to Sampo and made a demand on the bond “on behalf of the Government of Singapore”. Sampo refused the call and the matter was then litigated. In the District Court, RSA secured a judgment in its favour. Sampo appealed the decision to the High Court.

One of the arguments put forward by Sompo was that the bond had ultimately expired as it was not called upon by the Singapore Government. This point was easily disposed by the High Court on the ground that the letter of the RSA’s lawyers was in effect written “on behalf of Singapore Government” as they acquired the right to wear the shoes of the assured, in this case the Government, pursuant to their right of subrogation.

The main discussion was whether the insurer’s right of subrogation extended to the right to call on the performance bond.  The High Court had no doubt that it did. Philip Jeyaretnam JC confirmed that the common law principle of subrogation grants an insurer the entitlement to every right the assured has to recover in respect of a loss including the right to call on a performance bond.    

The judgment is not only in line with the wording and ethos behind s. 79(1), but is in accord with the case law on the subject especially Castellian v. Preston (1883) 11 QBD 380; London Assurance Corp. v. Williams (1892) 9 TLR 96 and more recently England v. Guardian Insurance Ltd [2000] Lloyd’s Rep IR 409. Moreover, it would have been incongruous to hold that insurers are entitled to pursue subrogated recoveries against the person responsible for the loss but not use all rights and remedies that the assured would be able to pursue for recovery including calling on performance bonds. It is very likely that a similar judgment would have been delivered, had the case been litigated in England & Wales.

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