A subrogation clause in an insurance contract does not allow an insurer to sue in its own name without an absolute assignment of rights from the insured.

Gan Techiong JC:

Introduction

[1] Is a subrogation clause in an insurance contract sufficient to empower an insurance company (the insurer), using its own name, to sue a party who had contracted with the insured, for breach of contract or to sue a tortfeasor who caused the insured to suffer a loss? It is trite that a subrogation clause in an insurance contract gives the insurer a right to compel the insured to sue a tortfeasor or the party who breached a contract with the insured, as the case may be, and for the insurer to receive the damages recovered. However, does a subrogation clause in an insurance contract give an insurer a right to use its own name to sue the other party? Is an absolute assignment necessary to clothe the insurer with a right to sue in its own name? These two questions of law arose because there is no privity of contract between an insurer and the party who breached a contract with the insured, and if the insured has suffered a loss allegedly due to the negligence of a third party, the tortfeasor will plead that he does not owe the insurer any duty of care.

[2] In this case, the aforesaid questions of law arose in the Defendant's application to strike out the 1st Plaintiff's claim under O 18 r 19(1)(a),(b) and (d) of the Rules of 2012. The answers to those two questions of law would determine whether the 1st Plaintiff's claim was obviously unsustainable.

[3] After hearing and reserving decision to consider those questions of law thoroughly, I decided to allow the Defendant's application to strike out the 1st Plaintiff's claim. After reading all the authorities, I formed the view that a subrogation clause in an insurance contract does not give an insurer (the 1st Plaintiff herein) a right to use its own name to sue a third party (the Defendant), and that an absolute assignment of the insured's chose in action is necessary to clothe the insurer with a right to sue in its own name. My reasons are as stated below.

The Undisputed Facts

[4] The 1st Plaintiff is an insurance company/insurer that entered into an insurance contract with the 2nd Plaintiff (the insured) to cover the 2nd Plaintiff against various risks at a construction site where the 2nd Plaintiff was engaged as the building contractor. The site was at Lot PTD 25671, Jalan Sagu 36, Taman Daya, 81100 Johor Bahru ("the Project Site").

[5] The Defendant was a security company that entered into a contract with the 2nd Plaintiff to provide security services at the Project Site ("the Security Services Contract").

[6] A theft of the newly installed electrical cables and fibre optic cables occurred at the Project Site on or about 31 July 2017 - which was a risk covered by the said insurance contract. The 2nd Plaintiff/insured duly looked to the 1st Plaintiff/insurer for compensation. The 1st Plaintiff appointed adjusters to assess the claim and honoured the insurance policy by paying compensation of RM1,314,361.52 to the 2nd Plaintiff.

[7] The 2nd Plaintiff was asked to, and did sign a "Discharge and Subrogation Form" dated 21 May 2018 to confirm:

(i) acceptance of the 1st Plaintiff/insurer's offer to pay RM1,314,361.52 as full and final settlement of the 2nd Plaintiff/ insured's claim under the insurance contract; and

(ii) that the 1st Plaintiff is subrogated with the 2nd Plaintiff's rights to recover from any party liable for the loss or damage (that gave rise to the insurance claim). The contents of the "Discharge and Subrogation Form" (as exhibited in the 1st Plaintiff's affidavit) are as follows:

The Plaintiffs' Pleaded Case

[8] As is evident from the intitulement of this civil suit and Statement of Claim, the insurer had named itself as the 1st Plaintiff and the insured as the 2nd Plaintiff, to bring an action in tort against the Defendant for breach of duty of care. In a Statement of Claim that pleaded the salient facts as narrated above, it was further pleaded that pursuant to the said "Discharge and Subrogation Form", the 1st Plaintiff was subrogated w