Subrogation of insurance

We are an insurance company based in Morogoro. Our client, who owned a very expensive car, was involved in a motor vehicle accident with a passenger bus of a famous transportation company (whose name we wish not to disclose). Our client had insured his vehicle under comprehensive insurance coverage with us. We promptly paid our client as per his insurance cover and later pursued the transportation company with a claim to reimburse the amount paid to the client. This is an accepted insurance practice referred to as subrogation. We have learnt that the transportation company has insurance coverage with its insurer. However, the insurance coverage was paid at a very low premium, which, in valuation, will not cover the entire amount we paid to our client.  This has made us uncertain about the amount we will likely recover under subrogation. Please guide us.
MK, Morogoro

Subrogation describes a legal right held by insurance carriers to legally pursue a third party that caused an insurance loss to the insured. The right developed from the common law practices used by English Courts in adjudicating insurance disputes and is referred to as the doctrine of subrogation. In principle, the doctrine of subrogation provides that upon payment of compensation to the victim (the insured) of an accident/insured risk, the insurer has the right to step into the shoes of the insured (client) and sue the one who caused the accident/insured risk (third party) to recover the money insurer paid to the client.

In most subrogation cases, an individual’s insurance company pays its client’s claim directly and then seeks reimbursement from the other party’s insurance company. In some instances, insurance policies may contain language that entitles an insurer, once losses are paid on claims, to seek recovery of funds from a third party if that party caused the loss. It is also worth noting that the insurer’s right to claim under the doctrine of subrogation limits the insurer’s claim against the third party to the right of the insured, that is, she cannot claim more than what would have been claimed by the insured. Tanzanian courts have relied on English case law to interpret the doctrine of subrogation in their own decisions.

From what you have disclosed, it is clear that your claim is for reimbursement of the entire amount paid to the client. At this juncture, it is worth noting that your claim against the other insurance company cannot be more than what your client would have been paid from the transportation company’s insurers. We have reviewed similar insurance cases and found that payment under the right to claim against a third party is limited to the third party’s insurance cover note. Therefore, you will be reimbursed in accordance with the third party’s insurance cover note, which, unfortunately, as you said, is lower than the entire amount paid to the client. Your lawyer can guide you further.