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Insurance - Subrogation - Not Against Own Insured

Rochon v. Rochon (Ont CA, 2015)

In this case the Court of Appeal upheld the dismissal of a subrogation action by one insurer against another under the policy that an insurer cannot subrogate against it's own insured:
[70] Grenville contends that the rule against an insurer suing its own insured under the same policy, no matter how negligent they were in causing the loss, should not apply to a dispute between two insurers. There is nothing improper, unfair, or contrary to public policy when a home insurer subrogates against an automobile insurer for damages arising from the use or operation of a motor vehicle.

[71] I would not give effect to Grenville’s policy argument.

(a) Policy Reasons for not Allowing Subrogation

[72] There are powerful policy reasons working against Grenville’s position.

[73] I start with the fundamental notion that insurers should not be permitted to subrogate against their own insured: Commonwealth Construction Co. Ltd. v. Imperial Oil Ltd. et al., 1976 CanLII 138 (SCC), [1978] 1 S.C.R. 317. The fact that an insured may have other insurance is, in my view, irrelevant. A suit by an insurer against its own insured does not fulfil the aims of subrogation, which is to avoid overpayment of the insured: Statesman, at paras. 26-28.

[74] Further, subrogation against an insured should be barred because the insurer has contracted to take onto itself the very risk at issue, thereby taking it away from the insured: Statesman, at para. 49.

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