For years the courts have grappled with the problems of subrogation, in particular in interpreting insurance provisions in construction contracts. If an insurer pays out an innocent party, can it then stand in their shoes and sue the guilty party to recover what it has paid? What if the insurance is in joint names?

In Gard Marine & Energy Ltd v China National Chartering Co Ltd the Court of Appeal said that it is vital to construe the underlying contract between the parties to see if there is truly an intention that the insurance is for the joint benefit of the parties. It must also be remembered that one of the main reasons why parties take out insurance is that they need to be covered for the consequences of their own negligence. The prima facie position, where a contract requires a party to the underlying contract to insure, should be that the parties have agreed to look to the insurers for indemnification rather than to each other. That will  be all the more so if it is agreed that the insurance is to be in joint names for the parties’ joint interest or if there are other relevant circumstances.

Gard Marine & Energy Ltd v China National Chartering Co Ltd (Rev 1) [2015] EWCA Civ 16