Introduction

In a recent aviation dispute which we handle, the opposing party contended that our client had failed to produce documentary evidence or call witnesses to establish the existence of the relevant insurance policy and by extension, the alleged subrogation. This raises two related questions: (1) whether the doctrine of subrogation must be pleaded; and (2) whether the existence of the insurance policy and the payment made pursuant to the policy must be proved by evidence.

The short answer to both questions is that it depends on the identity of the named plaintiff and the nature of the claim being pursued.

Background facts

The case arose from a ground collision between a commercial jet and an airport vehicle after the commercial jet was given clearance to land on the runway at the Subang Airport, resulting in significant damage to the commercial jet and a fatality involving the death of the airport vehicle driver.

The plaintiffs in this case are the legal and beneficial owner of the commercial jet, i.e., the insured.

Doctrine of subrogation

The doctrine of subrogation is a well-established principle in insurance law which allows an insurer, upon indemnifying its insured for a loss, to pursue recovery from the party responsible for that loss. The doctrine seeks to prevent an insured from recovering twice for the same loss while allowing the insurer to recoup, to the extent permitted by law, the amount it has paid under the policy.

In the context of liability and property damage claims, subrogation may arise where the insured’s loss was caused by negligence, breach of contract, or other wrongful act of a third party. Following payment of the insured’s claim, the insurer may seek to exercise the insured’s rights and remedies against the responsible party. The scope and manner in which such rights may be exercised will depend on the terms of the insurance policy, the nature of the underlying claim, and the applicable law.

Under the doctrine of subrogation, an insured must bring an action against the wrongdoer if he is called upon by his insurers to do so, but it is his own cause of action, not that of his insurer. The insurer has no cause of action of his own. If the damages suffered by the insured are paid by the insurer, the doctrine of subrogation still applies and the insurer may require the insured to take an action against the wrongdoer for the recovery of all the damages flowing from the latter’s negligence.

The need to plead the doctrine of subrogation

When a claim is initiated under the name of the insured, there is no need to plead the doctrine of subrogation. In Kementerian Pertahanan Malaysia & Anor v Malaysian International Shipping Corp Bhd & Ors [2007] 5 MLJ 393, an action initiated by the insured, the Court of Appeal explained that:

“[13]     On the issue of subrogation not being pleaded, it is appropriate to reiterate the function of pleadings is to give notice of the case which has to be met by the opposing party. The purpose of particulars is to define the issues and to indicate to the opposing party how much range of his possible evidence will be relevant to meet those issues. In the circumstance of the present case the appellants need only state in summary form facts which they are relying on for the purpose of formulating a complete cause of action against the respondents, i.e. the alleged negligent acts of the respondent and/or their agents resulting in loss and damage. In our considered opinion there is no necessity to plead the doctrine of subrogation and particulars giving rise to the same.”

This case was followed by the court in Chong Kien Yong v Tan Chong Ekspres Auto Servis Sdn Bhd [2024] 10 CLJ 737 and Yung Kong Co Bhd v HHH Type Retreading Sdn Bhd & Another Case [2009] 4 CLJ 424.

However, one may need to plead the doctrine of subrogation if it is a claim initiated by the insurer against the insured for the breach of a subrogation clause. An example would be the case of AXA Affin General Insurance Bhd v K Thanarajah a/l Kanagaratnam [2017] 10 MLJ 243.

In this case, the defendant took up an insurance policy from the plaintiff, an insurance company. The defendant’s house was destroyed after a massive landslide in 2008. The defendant made a claim under the insurance policy. As a result, the plaintiff paid a sum of RM530,000. Subsequently the defendant initiated an action against the tortfeasors who caused the massive landslide. The defendant received a sum of RM1,297,000 via an out of court settlement. The plaintiff initiated this action against the defendant pursuant to the subrogation clause to recover the sum of RM530,000 that was paid under the insurance policy. The court allowed the plaintiff’s claim and ordered the defendant to repay the sum of RM530,000 that he had earlier received under the insurance policy.

The significance of AXA Affin lies in the nature of the proceedings before the court. The insurer was not simply an insured commencing an action against a third-party tortfeasor. Rather, the insurer itself was the plaintiff seeking to enforce a contractual right against its insured pursuant to the terms of the insurance policy.

The existence and terms of the insurance policy, the payment made under that policy and the relevant subrogation clause were therefore directly relevant to the insurer’s claim.

It is therefore important not to read AXA Affin as establishing a general requirement that an insured must plead and prove the existence of its insurance policy whenever it brings an action against a third party. The case concerned a materially different factual and legal setting: an insurer seeking to recover from its insured pursuant to a contractual subrogation provision.

Conclusion

The case law discussed above demonstrates that the treatment of subrogation in litigation depends fundamentally on who brings the action and the cause of action upon which the claim is founded.

Where the named plaintiff is the insured and the claim is brought against the alleged wrongdoer for loss and damage arising from the defendant’s negligence or other wrongful act, the insured is pursuing its own cause of action. The fact that the insured has been indemnified by its insurer does not, without more, convert the claim into a separate cause of action founded upon subrogation.

This article is authored by our Partner, Mr Cheah Soo Chuan and Senior Associate, Mr Khor Wei Wen. The information in this article is intended only to provide general information and does not constitute any legal opinion or professional advice.

Cheah Soo Chuan
Partner
T: +603 2050 1987
soochuan.cheah@taypartners.com.my

Khor Wei Wen
Senior Associate
weiwen.khor@taypartners.com.my