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The Subrogation in Armenian Legislation
 
After the adoption of RA law “On Compulsory motor liability insurance” Armenian society faced with mass application of the new legal institute which although being fixed in RA Civil Code since 1999, was not as popular just because the Insurance was not as popular in Armenia before.
While practicing law in Insurance company as a legal adviser I realized that the substance of the Subrogation is unclear not only to the ordinary people but also to many lagal practitioners and even to judges of common jurisdiction courts.
The primary goal of this law review article is to clarify the substance of the institute of Subrogation emphasizing its peculiarities and interpreting the basic lagel normes of Armenian legislation regulating it. At the same time some practical problems related to the Subrogation will be discussed below.

The Substance of the Subrogation and the Subrogation in Armenian Law:
''Subrogation allows an insurer who has indemnified an
insured to stand in the shoes of the insured on the insured’s
claim for damages against a third party, usually a tortfeasor.''
Paul L. Stritmatter1
In US case law the institute of Subrogation was defined as the substitution of one person in place of another so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights remedies, or securities2. This characterization mostly became a “cornerstone” for the traditional definition of the Subrogation stated in Black’s Law Dictionary3. Thus it can be concluded that in US law Subrogation has a quiet broad spectrum of usage such as not only insurance law but also areas of prevention of unjust enrichment or mortgage refinancing. While in the Armenian legal system the institute of Subrogation is exclusively related to Insurance field.
The basic definition of the Subrogation in Armenian law is stated in Article 1021 of RA Civil Code, according to which the Subrogation is the right to claim that the insured (or benefit-acquirer) has against the person liable for the losses compensated in the result of the insurance passes, within the limits of the sum paid, to the insurer who has paid insurance compensation. In other words, Subrogation is a transfer to insurer the right of insured to claim damages. Legally it implies the substitution of subjects in obligations, where instead of insured the insurer would be considered as a creditor.
Although it is not stated directly in RA Civil Code, but Subrogation has a dispositive nature, which means that the term excluding subrogation can be fixed in insurance contract by mutual agreement of parties.
Such a conclusion is drawn from the clause of RA Civil Code which states that a term of the contract excluding the transfer to the insurer of the right of a claim against a person who has intentionally caused losses is void, which is in accordance with overall principles of civil law declaring liability for intentional damages.
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1. Paul L. Stritmatter, Real Justice for Real people, Subrogation, Volume 1/ Issue 8, (2011) 3.
2. Jackson Co. v. Boylston Mutual Ins. Co., (1885) 139 Mass. 508, 510, 2 N.E. 103, 104,
3. Bryan A. Garner, Black’s Law Dictionary (West Group, Deluxe unabridged 9th edition, 2009),

Such a conclusion is drawn from the clause of RA Civil Code which states that a term of the contract excluding the transfer to the insurer of the right of a claim against a person who has intentionally caused losses is void, which is in accordance with overall principles of civil law declaring liability for intentional damages.
Logically this means that insurance contract may have a term excluding the transfer to the insurer the right of a claim against a person who has caused losses unintentionally, inadvertently or accidentally.
The 2nd part of Article 1021 of RA Civil Code states the procedural order of implementation of right on Subrogation. Especially the subrogee (insurer) must comply with requirements of legal acts regulating the initial realations between the insured (subrogator) and the subject liable for damages The classic example for such situation will be discussed while presenting problem with statute of limitations below.
According to the 3rd part of Article 1021 of RA Civil Code, the insured (or the benefit-aquirer) shall be obliged to transfer to the insurer all the documents and proofs and to communicate all information necessary for the exercise by the insurer of the right of a claim that has passed to it. Such can be considered the documents and the proofs which were not provided to insurer while deciding insurance case and the size of damage, but which may have great importance while implementation of Subrogation. As a common rule, in order to prove someone’s fault, there is a need to investigate broader spectrum of issues in comparison with those which can contribute to determining the existence of insurance case.
Rule stated in the 4th part of Article 1021 of RA Civil Code according to which if the insured (or the benefit-aquirer) renounced its right of claim against the person liable for the losses compensated by the insurer or the exercise of this right became impossible due to the fault of the insured (or the benefit-aquirer), the insurer shall be free from payment of the insurance compensation in full or in corresponding part and shall have the right to demand the return of the sum of compensation paid in excess, will be effective only when the right of Subrogation is not excluded from the contract.
Although the term of subrogation is also stated in Article 27 of RA law on '' Compulsory motor third party liability insurance'', on my personal assessment the most parts of the mechanism described in the Article 27 has nothing to do with the traditional definition of Subrogation, except from the situations where the owner of the road or the institution of machinery checkup are liable for accident.
Summarizing all of the above mentioned, it can be concluded that Subrogation is a unique legal institute due to its specific characteristics.
The Substance of Institute of Regress in RA Insurance Legislation.
Regressive claims or reverse demand (from latine regressus – reverse movement) is the claim of a person (regressant) who has paid to creditor, against third person (regressat) who is liable for that payment, to reimburse the sum paid to creditor. Rregressive claim is usually called “Regress” by legal practitioners.
The institute of Regress is typical for solidary obligations. As a common rule according to the first point of the second part of the Article 364 of RA Civil code a debtor who has performed a joint and several obligations has the right of a regressive claim against the remaining debtors in equal ownership shares less its own ownership share.
Another classic example of Regress is stated in the first part of Article 1074 of RA Civil Code according to which one who has compensated for harm caused by another person (by an employee in its performance of employment, official, or other labor duties, by a person driving a means of transport, etc.) shall have the

right of a claim over regress against this person in the amount of compensation paid unless another amount is established by statute.
Civil code, as a major legal regulator of the civil law relations, has a plenty of other legal norms related to the institute of the Regress, but it is not the unique legal act where the institute of the Regress is presented. Article 27 of RA law on “Compulsory Motor Liability Insurance” also states the institute of Regress (although it is titled as the Subrogation), presenting a range of specific situations when insurer has a right of regressive claim against the insured (the owner of the insured motor) as well as the person liable for the losses (driver of the insured motor) in sum paid to the injured person.
Concluding we can define the Regress as an independent Civil Law institute without confusing it with Subrogation.
Subrogation VS. Regress
In practice, not even all Insurance specialists clearly understand the basic differences and similarities between Subrogation and Regress, as both of them are the forms of reverse claims.
For that reason as the first step we shall consider the following similarities between the Regress and the Subrogation.
- Both the Regress and the Subrogation are types of reverse claim,
- Both of them are the mechanisms of the preformation of an obligation by the third party.
Although having some similarities the subrogation and the regress have the following crucial differences.
- In case of the Regress we have two separate relations those are the primary relation between injured (creditor) and liable person (debtor), and the secondary - the relation between regressant, who has made the payment to the creditor, and the regressat – the liable person (debtor). In case of the Subrogation only one singular relation exists.
- The Subrogation is a claim against liable third party, while the Regress is a claim against the subject (not necessary liable) with whom the regressant had realations before, for example the Insurance company has a Regress against the insured (the owner of the insured motor) with whom it had an insurance contract before, no matter whether the insured is liable.
- Furthermore, the realations of the Subrogation are regulated by the rules governing the relations between the primary creditor and debitor. In case of the Regressive obligations the common rules regualting performance of obligations operate.
Those differences have not only theoretical but also practical implications, such as the diversification of statute of limitations. According to 3rd. part of the Article 337 of RA Civil Code, on the Regressive obligations, the running of statute of limitation starts from the time of performance of the principal obligation. Taking into consideration above mentioned differences, it can be inferred that in case of the Subrogation the running of the statute of limitations starts with the lunching of the principal obligation5, for example in carriage relations according to RA Civil Code only one year of statute of limitations exists, thus in Subrogation lunching from carriage relations Subrogee would have only a year to claim against liable person.
Another problematic situation that I faced while my legal practice is related to the implementation of Article 411 of RA Civil Code which states the interests that should be paid for the use of another's monetary assets as the result of their unlawful retention.
____________________
5. K.B. Koraev, The Substance of Cession, Subrogation, Regress in Russian Civil Law, (Notarius, 2008),

The problem is that very often judges consider the Subrogation as a secondary obligation separating it from the primary relations and as a result they count the interests stated in Article 411 starting from the date when the insurance company paid the insurance compensation.
I think that it is a result of confusing the Subrogation with the Regress as in case of Subrogation which is a singular relation interests stated in Article 411 should be counted from the date when the primary relations start, in other words starting from the date of insurance incident.
Conclusion
The primary goal for what this law review article has been written is the clarification of previously unpopular civil law institute such as the Subrogation, stressing all those characteristics which diversify it from other similar institutes and mostly from the Regress. This article also covered some important aspects of Regress and while comparing it with the Subrogation explained some problematic situations which may be faced by legal practitioners.

 


Bibliography
- Paul L. Stritmatter, Real Justice for Real people, Subrogation, Volume 1/ Issue 8, (2011) 3.
- Jackson Co. v. Boylston Mutual Ins. Co., (1885) 139 Mass. 508, 510, 2 N.E. 103, 104,
- Bryan A. Garner, Black’s Law Dictionary (West Group, Deluxe unabridged 9th edition, 2009),
- K.B. Koraev, The Substance of Cession, Subrogation, Regress in Russian Civil Law, (Notarius, 2008),
- RA Civil Code 1998 Articles – 364, 374 (3), 411, 1021, 1074 (1),
- RA law on Compulsory Motor Liability Insurance 2010 Article – 27,

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