In a recently decided case, the Illinois Appellate Court, First District, ruled that an insurer can subrogate an additional insured under an insurance policy based on a contractual right to subrogation. Importantly, it was held that this can be done without considering equitable subrogation principles. This opinion, brought forward by Butler Weihmuller Katz Craig LLP, can be found here.
The verdict implies a departure from the previously established procedural norms of equitable subrogation. Traditionally, equitable subrogation entails that an insurance company takes over the legal rights of an insured party to pursue a lawsuit against a third party responsible for an incurred loss. This is usually done subsequent to the insurance company covering the loss for the party insured.
According to the Illinois Appellate Court, the insurer’s right to subrogate goes undeterred by any factors of an equitable nature. It is sufficient if the insurer has a contractual right to subrogation with respect to the additional insured. This landmark court decision has provided clarity on procedural ambiguity, and reflects a perspective that places contractual rights over equitable considerations.
This shift certainly generates important implications not only for insurance companies, but also for the insured parties and businesses across the legal spectrum. The verdict could impact future insurance contract negotiations, ongoing litigation, and decisions about seeking redress from third parties. It also raises questions about the balance between the legal contract and fundamental fairness, and whether the court’s decision in subsequent cases will lean towards prioritising the written word over equitable principles.