Differences between subrogation and subrogation

Differences between recourse and subrogation

To understand what the difference is between subrogation and recourse, let's start with examples in the Civil Code of the Russian Federation (hereinafter referred to as the Civil Code of the Russian Federation):
- recourse - the right of recourse of the person who compensated for the harm to its causer (for example, to an employee who caused harm in the performance of his labor function, clause 1 of article 1081 of the Civil Code of the Russian Federation);

— subrogation — transfer of the creditor’s rights under an obligation to another person, namely the transfer to the insurer of the creditor’s rights to the debtor, due to whose actions the insured event occurred (subclause 4, clause 1, article 387 of the Civil Code of the Russian Federation).

Both cases are aimed at implementing the principle of excluding unjust enrichment, that is, to prevent a situation where another person pays for the person who caused the harm, and he is unreasonably excluded from the number of obligated subjects.

At the same time, the difference between subrogation and recourse is that the right of recourse arises as such at the moment the creditor’s claims are satisfied by a person who is not the tortfeasor, and the rights of the person who satisfied the creditor’s demands, in the case of subrogation, are not new rights, but transferred to him rights of the creditor, in connection with which subrogation is an example of a change in persons in an obligation.

There is a point of view in the doctrine that the differences between recourse and subrogation are that:

• subrogation is a special case of recourse;
• subrogation is an innovation of the Civil Code of the Russian Federation, and the concept of recourse existed before.

Read about the nuances of recourse in bankruptcy cases in our article “When recourse against the insolvency administrator who caused the losses, the insurer must prove the intentional nature of the insolvency administrator’s actions.”

What is regression under compulsory motor liability insurance?

OSAGO is a civil liability protection agreement drawn up between a company and the owner of movable property. Like any other document, it has a whole list of conditions for the provision of specific services, including the return of compensation payments from the client. How recourse for insurance premiums is made in 2021, and how it differs from subrogation, will be discussed in the article below.

According to generally accepted regulations,

The insurance company acts as an indemnifier, obliging to cover the costs of third parties injured due to the fault of the policy owner. The driver in this situation is the direct cause of harm, avoiding financial liability due to the effect of the contract. But in practice, there are cases when the parties change their responsibilities, and the ordinary car owner, and not the insurance company, becomes the debtor. This phenomenon is called regression under compulsory motor liability insurance.

However, the company can exercise the right to demand the return of compensation only if the conditions for providing civil liability protection are violated by the client. In other circumstances, the return of funds spent by the company must occur by declaring subrogation, including through a lawsuit.

Difference and similarity with subrogation

Subrogation and recourse are two very similar terms that involve the recovery of funds in favor of the insurance company. But in the first case, responsibility for such payment falls on the culprit of the traffic accident, regardless of whether he is the owner of the policy or not. The second option gives the insurance company the right to bring claims exclusively against its client who caused the accident.

At the same time, most experts believe that subrogation is a subtype of recourse, since the general scheme of action of these processes is exactly the same. But in fact, both concepts are completely independent and do not depend on each other in any way. Moreover, under specific circumstances, these two rights can be applied simultaneously, which does not contradict the law of the Russian Federation.

What is the difference between recourse and subrogation and assignment?

When resolving the question of how recourse differs from subrogation, the problem of distinguishing them from another related category - assignment - often arises. Under cession, according to Art. 388 of the Civil Code of the Russian Federation, refers to the assignment of the right of claim.

Cession and subrogation are united by the fact that both of these institutions are types of transfer of the rights of the creditor to another person. However, their difference lies in the fact that subrogation is one of the types of transfer of the creditor’s rights to a third party on the basis of law (Article 387 of the Civil Code of the Russian Federation), and assignment is an assignment of a claim, permitted if it does not conflict with the requirements legislation (clause 1 of article 388 of the Civil Code of the Russian Federation).

At the same time, according to paragraph 2 of Art. 387 of the Civil Code of the Russian Federation, relations regarding the replacement of a creditor by force of law can, as a general rule, be regulated by provisions on assignment. On the assignment of the right of claim

Differences

The measures under consideration differ radically from each other, including in the basis for the emergence of the right and in the category of the person who has this right. The main differences and comments on them are reflected in the table below.

Table 1. Comparative characteristics of recourse and subrogation

Difference between subrogation and subrogation in simple words

Based on the above, we note that the difference between subrogation and recourse can be expressed in simple words as follows. With subrogation, the creditor is replaced, and with recourse, a completely new right arises that did not exist before.

Often the distinction between the concepts under consideration is given in judicial practice. Thus, in the resolution of the 17th AAS dated July 26, 2017 No. 17AP-7590/2017-AK in case No. A60-6971/2017 the following differences are given:

• in case of recourse, a new obligation arises and there is no change of persons in obligations;
• recourse excludes the application of Ch. 24 of the Civil Code of the Russian Federation and Art. 965 Civil Code of the Russian Federation;
• recourse arises from tort (causing harm), and subrogation arises from contract (insurance relations);
• in case of recourse, in addition to the relationship between the debtor - the tortfeasor and the creditor - the victim, a relationship arises between the debtor - the person responsible for the losses, and the creditor - the person who compensated for the losses.

On our website you will also find explanations in simple words and other terms. In particular, in the articles:

• “Barter - what is it in simple words?”;
• “What is acceptance in simple words?”;
• “What is this - an offer - in simple words?”

Differences between subrogation and recourse in insurance

The insurer's right of recourse is in many ways similar to the right of subrogation that an insurer has in property insurance obligations. The Civil Code of the Russian Federation establishes that unless otherwise provided by the property insurance contract, then after payment of insurance compensation the right to demand compensation (within the amount paid) from the person responsible for the losses passes to the insurer.

The differences between recourse and subrogation are as follows. Firstly

, these institutions have different reasons for their emergence. The right of recourse arises from the relationship of causing harm, and the right of subrogation follows from the insurance relationship, which is contractual.

Secondly

, in case of recourse, along with an obligation where the victim acts as a creditor, and the tortfeasor acts as a debtor, a new (in addition to existing) obligation arises. In the new obligation, the creditor is the person who compensated the losses to the victim instead of the direct causer, and the debtor is the person responsible for the losses.

With subrogation, a new obligation to compensate for losses does not arise. This is due to the fact that the creditor is being replaced in an already existing obligation. In other words, the policyholder transfers to the insurer his right of claim against the person who is his debtor. As a result, the insurer replaces the insured as a creditor in another obligation.

Third

, the right of subrogation is based on law and does not require additional inclusion in the insurance contract, although the property insurance contract may provide otherwise and the parties may exclude subrogation. The exception is the situation in which harm was intentionally caused. As mentioned above, in this case, the condition of the contract that excludes the transfer to the insurer of the right of claim against the person who intentionally caused the losses will be void.

Summarizing the above, we note that if the amount of compensation paid by the insurance company under the comprehensive insurance agreement exceeds the insured amount under the compulsory motor liability insurance agreement, then the insurance company, by way of subrogation, along with the claim to the insurance company that is obliged to make insurance compensation under the compulsory motor liability insurance agreement, passes the claim to the culprit of the accident in a portion exceeding this amount.

If we talk about regression, its establishment has two main goals:

• recourse protects the property interests of the victim who has suffered harm (an insurance payment is made to him to compensate for the harm caused);
• it protects the property interests of the insurer (the insurer receives compensation for expenses incurred for insurance payments to the victim).

If there are legal grounds, the insurer has the right to file a recourse claim against the policyholder. Please note that this is a right, not an obligation of the insurer.

Table of recourse and subrogation ratio

To summarize the various positions regarding the relationship between recourse and subrogation, we present a table of the differences between these concepts.

The distinction proposed in the table is not unconditional and is debatable (for example, paragraph 6). The list is not exhaustive; doctrine and practice may provide other grounds for comparison.

Application of recourse law

The rules of recourse are most often applied in the field of civil liability insurance and include the insurer's return to the guilty party for the return of losses incurred by him, as a result of payment of compensation to the insured person.

The company can use the right of recourse and insurance in the following cases:

1. The perpetrator intentionally caused harm to the victim.
2. The guilty person was in a state of any type of intoxication at the time of driving.
3. At the time of the accident and the resulting harm to the injured party, the person at fault did not have documents to drive the car.
4. The culprit fled the scene.
5. The driver was not included in the list of persons who have access to drive a vehicle, according to the terms of the insurance contract.

According to the rules of recourse, the transfer of the right of claim does not take place, but a new obligation arises.

Assignment, subrogation and recourse in the resolution of the Plenum of the Armed Forces of the Russian Federation dated December 26, 2017 No. 58

As we noted earlier, Resolution No. 58 contains a block of clarifications of judicial practice that combines assignment, subrogation and recourse. The clarifications relate in particular to the following:

• An agreement on the assignment of the right of claim in relation to insurance payment is concluded if it is possible to accurately determine in relation to which right the assignment was made. Moreover, if the exact amount of the assigned right is not determined in the agreement, it can still be considered concluded (clause 69).
• Transfer of the rights of the victim is possible only after the occurrence of an insured event (clause 70).
• If the insurer has paid an amount under a voluntary insurance agreement that exceeds the amount of payment under a compulsory insurance agreement, then by subrogation it may recover both the amount payable under the MTPL legislation from the insurance company obligated to make this payment, and the difference between these amounts from the tortfeasor (paragraph 74).

Would you like to study Decree No. 58 in more detail? Get free access to ConsultantPlus..

Some nuances of practice regarding recourse and subrogation

Also in judicial practice, the following nuances regarding recourse, subrogation and their relationship are noted:

• if there is a private transfer of debt, that is, the original debtor completely leaves the relationship, and the new debtor, having fulfilled his obligations, covers his own debt to the creditor, this does not give the new debtor the right to recourse or subrogation claims against the original debtor (clause 19 of the Review of Judicial Practice RF Armed Forces No. 1 (2018), approved by the Presidium of the RF Armed Forces on March 28, 2018);
• due to the fact that during recourse, material succession does not occur, but a new obligation appears, the pledge provided as security for the original obligation does not secure the new obligation (resolution of the 8th AAS dated September 26, 2017 No. 08AP-10703/2017 in the case No. A75-12404/2016).

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So, this article outlined the difference between recourse and subrogation, including both the position in the doctrine on this issue and the conclusions of judicial practice.
In general, most sources agree that with subrogation, a change occurs on the creditor’s side with the preservation of obligations, and with recourse, a new obligation arises that did not exist before the satisfaction of the creditor’s claims. You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.