The principle of subrogation – now a universally recognised component in almost every insurance contract – is where an insurer, having indemnified an insured, acquires all the rights and remedies of the insured with respect to the subject matter of the damage. In Nigeria, it has gained statutory recognition under the Marine Insurance Act(1) and other laws.
A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the insured, in the manner and to extent agreed, against marine losses (ie, the losses incident to marine adventure).(2) In Nigeria, due to the volume of maritime transactions, legal issues often arise which have previously been overlooked by insurers, particularly in marine insurance contracts. This trend must be addressed in order to strengthen the marine insurance industry in Nigeria. One such issue is the right of an insurer against the insured where the insured deliberately frustrates the insurer from exercising its contractual right of subrogation.
Recently, a Nigerian insurer instituted an action against an insured at the Federal High Court in Lagos(3) on the sole ground that the insured deliberately frustrated its subrogation rights against the third party that caused damage to the insured's property. This is a novel situation and the court's ruling in this case could define Nigeria's marine insurance jurisprudence.
The insured protected its vessel with the insurance company against damage or loss. During the period of the insurance contract, the insured's vessel was damaged by a third-party vessel while at berth. The insured subsequently claimed damages under the insurance contract. As the insured was indemnified, the insurer's contractual/statutory right of subrogation was activated. In defiance of the insurer's rights, the insured refused to allow the insurer to pursue the claim in its name. Despite correspondence from the insurer reminding the insured of its contractual right of subrogation and the need to act timeously so that the action would not be statute barred, the insured maintained its defiant posture, the action became statute barred and the right of the insurer against the third party lapsed.
The insurer has sued the insured claiming a refund of the sum paid to the insured as indemnity and damages for breach of contract.
In Nigeria, the Marine insurance Act provides for the subrogation right of an insurer. Section 80(1) of the act states that:
"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 shall thereupon become entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and shall thereby be 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."
It therefore follows that the insurer's right of subrogation is not only set out in the contract, but also statutorily implied in every marine insurance contract transaction in Nigeria. Although the statute makes no express provision regarding the remedy available to an insurer where this statutory right is breached, the pertinent question is whether the insurer has any remedy in the circumstances.
In many cases the Nigerian courts have ruled on the universally recognised legal maxim 'ubi jus ibi remedium' – wherever there is a right, there should be a remedy. In Igbani v Bayelsa State Independent Electoral Commission(4) the Court of Appeal held as follows on the application of the maxim:
"The law is never helpless in remedying any wrong. The maxim is ubi jus ibi remedium. If the court is satisfied that a person has suffered a legal injury it will surely provide a remedy. The court cannot do otherwise. The court will duly give a remedy where the facts as disclosed fall within a remedy recognized by law. See the cases of Bello v. Attorney- General, Oyo State (1986) 5 NWLR (pt.45) 828, 890; Attorney-General Lagos State v. Eko Hotels Ltd (2006) NWLR (pt.1011) 378; Amaechi v. INEC (2008) 5 NWLR (Pt.1080) 227."(5)
In a more recent case, United Microfinance Bank Limited Ekpan v Adjaka,(6) the Court of Appeal further held that "the maxim ubi jus ibi remedium is a principle of justice of universal validity that is available to all legal systems involved in the impartial administration of justice. The maxim enjoins the courts to provide a remedy whenever a plaintiff has established a right".
The Marine Insurance Act clearly vests a recognised legal right of subrogation on the insurer. A party need only establish a recognised legal right and the courts will enforce it. While the court's decision in the case detailed above is still awaited, it is expected to follow the line of reasoning already established by the Court of Appeal.
For further information on this topic please contact Nwabueze Anachebe at Akabogu & Associates by telephone (+23 41 790 5831) or email (firstname.lastname@example.org). The Akabogu & Associates website can be accessed at www.akabogulaw.com.
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