A legal twist in insurance claims

In the complex world of insurance law, subrogation plays a critical role, allowing insurers to step into the shoes of the insured and pursue claims against third parties.

In this article, Prof Robert W. Vivian and Donald Dinnie (Norton Rose Fulbright) explore a recent case, Le Bonheur v Stellenbosch Vineyards, shedding light on this principle and its procedural implications.

We believe this article provides valuable insights into how subrogation works in practice and why it remains an important consideration for both insurers and policyholders. It’s an interesting read for anyone looking to better understand this key area of insurance law.

The Le Bonheur case

An unusual turn of events recently took place in the case of Le Bonheur v Stellenbosch Vineyards.  On the face of it, the case was routine, even mundane.

The insurer had insured property of Le Bonheur [the insured] against damage to property by fire.  A fire occurred resulting in R12 m damages.   The insurer indemnified the insured and investigated to see if any third parties could be held to be legally liable for the damage.  The insurer formed the opinion that Stellenbosch Vineyards and others were legally liable to the insured. If the insurer is correct then the insured, would have two claims, a claim  in contract, for indemnification, against the insurer and a second claim against the third parties.

The insured, being indemnified, could obviously not benefit from both claims.  This is a common feature where insurance is involved.  How is this to be dealt with?

Subrogation: a 400-year-old legal principle

Nearly 300 years ago Lord Mansfield in Mason v Sainsbury 1782 had to deal with this situation.  An insurer had indemnified the insured but also had a claim against a third party, in this case the local authority, referred to those days as the hundred.   Lord Chief Justice Mansfield noted with approval how it was being dealt with.

“[It] is evident from the nature of the contract of insurance.  It is an indemnity.  Every day the insurer is put in the place of the insured. … The insurer uses the name of the insured”

A number of points should be made about Lord Mansfield’s comment.

• The above way of dealing this situation is the mere consequence of the contract of indemnity, such a contract of insurance. This, the South African Court of Appeal (SCA) more recently put it, is a naturale of the contract of indemnity. (Rand Mutual v Road Accident Fund 2008 SCA). 

• As is now said, somewhat inaccurately, the insurer stands in the shoes of the insured.
• The insurer uses the name of the insured. The insurer sues in the name of the insured.
• The above was recognised as the then standard way dealing the problem of double indemnity. Lord Mansfield was not creating a new way to deal with double indemnity.  It was already the well-known practice.

Lord Butler, in the same judgement noted:

“The better way is to consider this as a contract of indemnity. The principle is, that the insurer and insured are one …” 

The above practice is now called subrogation.  It is not clear when subrogation began. 

In Roman-Dutch law the  term “subrogation”, in the technical sense, does not appear as a distinct labelled doctrine in the era of Johannes Voet.  The Voet Pandect is a comprehensive commentary on Justinian’s Digest, integrating Roman law with the Dutch law of Voet’s time and is a foundational text for Roman-Dutch law in South African jurisprudence.

The underlying principles are, however, present in Roman law and discussed in Voet in the context of obligations, cessions of actions and indemnity.   The cessions of actions and the transfer of claims are the doctrinal ancestors of subrogation. For example, in Roman law when a creditor’s claim is satisfied by a third party, the third party could be subrogated to the creditor’s rights against the debtor.  Many of the leading Roman-Dutch jurists, such as Grotius, Van Leeuwen, and Van der Linden, discuss the transfer of rights and the prevention of unjust enrichment, which underpin subrogation.

Subrogation was clearly already well-known in 1782.   The modern fire insurance market had started more than 100 years earlier. It is reasonably safe to assume subrogation has existed, worldwide, for about 400 years.  Some writers have traced it back to Roman day. But as is seen from the above it is merely a consequence of the contract of indemnity and not peculiar to insurance.  Although it is most often applied in the insurance context.  The doctrine of subrogation in South African insurance law is a development influenced by English law but is consistent with Roman-Dutch principles.

The legal impasse: insurer vs. insured in court

In the Le Bonheur case the insurer was thus treading a well-worn path.   One could well ask with justification; what after 400 years could go wrong?  The answer to this question is when the insurer through its attorney and advocates arrived at court, the insured also turned up and brought an application to dismiss the insurer’s legal team and replace it with its own.  It has given instructions to its team to dismiss terminate the case before the court.  The insured itself, turning up in court, is the unusual feature of this case.  The court did not seem to know how to deal with the turning up of both the insurer and the insured to the same court case.

It is suggested that The Bonheur case can be dealt with by posing and asking and answering a simple question; was the insured, in fact, before the court?   The insurer instructed its attorney to issue summons, in terms of subrogation, against the third party.  It did so and at the time with the insured’s blessing.  The summons used the name of the insured and the insurer’s cause of action was that of the insured.  This is the procedure used for 400 years.    

Legally speaking, law can be divided into two categories, substantive and procedural law.  Rights and obligations which exist, exist in substantive law but how these rights are brought before the courts are the subject of procedural law.    Procedural law allows the insurer to sue in the name of the insured and presents its case as the case of the insured. 

There is only one cause of action against third parties, that of the insured. 

In the words of Lord Butler, on this point the insurer and the insured are one.  Some writers have expressed the view it is unnecessary to refer to subrogation as a separate right of subrogation since it mere consequence of contract.  The rights itself come from the contract.

A few points need to be made about procedural law.  Firstly, it cannot create or remove substantive rights.  Secondly procedural law is under the control of the judiciary.  Probably for this reason there has been very little need to discuss procedural law.  To place a matter such as the Le Bonheur matter before the court involves attorneys, advocates and judges.  All of these are very qualified and experienced.  This is a reason given by the great scholar on jurisprudence, Salmond, as to why the English legal system has worked so very well.  It is manged by a very qualified and experienced team.  One does not expect to run into problems with procedural law.  By its nature the legal procedures are complex but under the control of very experienced teams.  In terms of the first point since the insurer has a well-established “right” in terms of subrogation to recover the amount it paid the insured from the third party and this “right” cannot be negated because of procedural law.

The unusual feature of the insured sending it own legal time, the court noted, threw the cat amongst the pigeons.

The answer to the question was Bonheur before the court is fairly easy to determine.  To bring a matter before the court is usually initiated by the issuing of a summons and to do that the party issuing summons has to grant power of attorney to the attorney on record.  All the evidence on record, as cited in the judgement makes it clear that this matter was not brought to court by the insured but by the insurer, in the name of the insured.  The insurer controlled the litigation under the terms of the subrogation provisions in the relevant policy (and at common law principles). There is nothing on record which suggests that the insured brought the matter to court at its own instance.  The evidence points in the opposite direction. 

The insured’s enthusiasm for the subrogated recovery action (in which it had until that time actively participated) later waned and the insured purported to terminate the authority of the insurer’s attorneys and the litigation.  The insured sought to substitute its own attorneys on record.   The application for substitution should never have succeeded under these circumstances. 

The future of subrogation

The final position arrived at by the court is clearly untenable.  There cannot be two plaintiffs on the same matter.  As Lord Butler pointed out in subrogation the insurer and insured are one.  There can only be one cause of action. 

The position is correctly dealt with by the Supreme Court of Namibia in Joseph Sheehama v Josef Stallin Nehunga (SA 13 of 2019) [2021] NASC 1 (7 April 2021). In this case two cousins were driving in convoy.  It was anticipated that the one would follow the other but unexpectedly during the journey the cousin in the rear decided to overtake.  Not anticipating this, the lead cousin unexpectantly turned to the right, colliding with the overtaking cousin.  The cousin in the rear was insured, and it was anticipated between the cousins the insurer would cover the costs of the damage.  The insurer indemnified the rear cousin but in terms of subrogation sued the lead cousin.  It was only when the matter was before the court, the cousin indicated that he was not suing his cousin; it was his insurer.  The trial judge, the court a quo, was taken aback by this indicating that this fact should have been set-out in the pleadings.  That is of course incorrect.  The Nambian Supreme Court had to set the matter straight, and by the way while doing so expressed its displeasure at the state of the South African law on subrogation [par 22]:

“It thus follows that there is no duty on an insurer where it sues in the name of the insured by virtue of the doctrine of subrogation to allege or prove the subrogation. It is still the claim of the insured who is vested with the rights and the fact that it is the insurer who is in charge of the proceedings is irrelevant to the cause of action. I am thus not impressed by the South African authority cited by the counsel … [ie Nkosi v Mbatha ZAKZPHC 2020]}”

The inchoate position of the law after the Le Bonheur case is highlighted in the more recent judgment of Esperance Vineyards Farming (Pty) Ltd and Others v Liebenlogistics (Pty) Ltd (17144/24) [2025] ZAWCHC 399 (3 September 2025) where the court correctly came to the conclusion that insurers cannot sign discovery affidavits in subrogated recoveries pursued in the name of the insured.  Only a party to the proceedings can depose to the affidavit and since the insurer per se in subrogated proceedings is not a party, it could not do so. 

Subrogation gives the insurer the procedural right to control the proceedings.  The Le Bonheur judgment does not deal with and thus identify difficulties which arises where, if the insurer is elected to become the party to the proceedings in its own name.  This is possible on the basis of the Rand Mutual v Road Accident Fund SCA 2008 judgment.  It was not explained how the insurer acting in its own name can have a properly deposed discovery affidavit or knowledge of documents relevant to the litigation that lie with the insured.

Writer’s Thoughts

The Le Bonheur case raises an intriguing question: when an insurer steps into the shoes of the insured, who truly holds the rights to the claim? As we see in this case, subrogation isn't just a legal formality - it's a powerful tool that challenges the boundaries of ownership and control in insurance, making us rethink the roles of insurers, insured, and third parties. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]

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