Subrogation and recourse

In the event that an insurer pays for damages of the insured, the damages claim that the insured had towards the third party transfers from the insured to the insurer, as a consequence of which the insurer, in his own name, can take recourse to the party that caused the damages. This, in insurance law, is called subrogation. A number of important rules, taking into account the interests of both the insured as well as the insurer, have been laid down in article 7:962 of the Dutch Civil Code (DCC).

First, it is important to note that by payment of the damages by the insurer, the claims that the insured might have towards another insurer (confluence) do not transfer to the insurer on the basis of subrogation. According to the law, the insurer has their own claim/ right of recourse/ towards that other insurer.

Subrogation also occurs if the insurer voluntarily pays the damages. The third party having caused the damages therefore cannot argue that the insurer was not required to make the payment to the insured party. The insurer only acquires the rights up to the amount that was paid to the insured. He cannot claim more than the claim of the insured party.

As noted above, subrogation is limited to the claims for compensation. Subrogation therefore does not entail claims to the (re)possession of goods, such as a stolen car, the value of which the insurer has paid to the insured. In such a case, the insured party will have to transfer the property rights to the insurer separately.

In recourse cases, it is important to note that the insured has the priority claim. It may occur that damage suffered by an insured party is not fully repaid by the insurer, for example due to underinsurance or the insured’s deductible excess. In that case, both the insurer and the insured have a claim against the liable third party. In the event that the amount is not fully recoverable from the third party, or if the third party’s liability is limited on the basis of law, the insurer’s claim has priority.

In practice, this means that not only the insurer has a recourse interest, but also the insured, if only to reclaim his deductible excess.

Finally, the law includes stipulations on the basis of which claims against a number of specific categories of persons is excluded. This specifically regards persons whose relationship with the insured could be disrupted or whose liability for claims would also economically harm the insured in the event that recourse would be sought.

The insurer therefore cannot obtain a claim against:

  • The insured party; (the policyholder);
  • The co-insured;
  • The spouse or registered partner of the insured (as long as the couple is not separated);
  • Other life companions of the insured;
  • Direct blood relatives of the insured;
  • An employee or the employer of the insured; or
  • A person in the service of the same employer as the insured.

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