Exceptions on the Rule of Subrogation

Subrogation is the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties. It is a well established rule in Philippine Law. In the case PAN MALAYAN INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, et. al.¹, the court enumerated the recognized exceptions to the rule of subrogation to wit:

"There are a few recognized exceptions to this rule. For instance, if the assured by his own act releases the wrongdoer or third party liable for the loss or damage, from liability, the insurer's right of subrogation is defeated [Phoenix Ins. Co. of Brooklyn v. Erie & Western Transport, Co., 117 US 312, 29 L. Ed. 873 (1886); Insurance Company of North America v. Elgin, Joliet & Eastern Railway Co., 229 F 2d 705 (1956)]. Similarly, where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the assured's claim for loss, the settlement is binding on both the assured and the insurer, and the latter cannot bring an action against the carrier on his right of subrogation [McCarthy v. Barber Steamship Lines, Inc., 45 Phil. 488 (1923)]. And where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary payment", the former has no right of subrogation against the third party liable for the loss [Sveriges Angfartygs Assurans Forening v. Qua Chee Gan, G.R. No. L-22146, September 5, 1967, 21 SCRA 12]."

¹ G.R. No. 81026, 1990 April 3