As Lord Mansfield ruled in one of the oldest English authorities on subrogation, payment of the loss by an insurer to its insured does not affect the liability of the wrongdoer. He set forth the basic principle as follows:
“Every day the insurer is put in the place of the insured … The insurer uses the name of the insured … I am satisfied that it is to be considered as if the insurers had not paid a farthing”.
So what was a sophisticated Court in South Africa thinking when, earlier this year, it came to the conclusion in Nkosi v. Mbatha (AR 20/10)  that a third party is able to raise the insurer’s indemnification as a defence to the related proceedings brought in the name of the insured?
In Nkosi, the plaintiff, having been involved in a car accident, was indemnified by her insurers in the sum of SA Rand 16,000 (approximately £1,500). A subrogation action was started but only during cross-examination did the plaintiff declare to the Court that she was proceeding on behalf of her insurers. When asked to give particulars, she refused (no doubt with her Lord Mansfield “Book of Quotes” in hand) on grounds that such information was irrelevant.
It seems that both the first instance Magistrate’s Court and then the Court of Appeal in Pietermaritzburg – both of which would be familiar with English common law as South African law is partly based on its principles – were annoyed by the plaintiff’s conduct finding – incorrectly in our submission – that subrogation was a fact that had to be specifically pleaded and proved to the court.
Fortunately, a very recent decision of a South African court suggests that there has been an appropriate judicial reaction to the Nkosi case. In Smith v Banjo (AR290/10) (12th November 2010) the KwaZulu-Natal Provincial Appeal Court ruled that the involvement of the insurer in a lawsuit is irrelevant and it is, therefore, not necessary to plead such involvement. It found Nkosi to be “clearly wrong” and “not binding on future courts”. Whilst it is pleasing that the South African Courts have remedied a poor decision the fact that the decision in Nkosi was ever made (and supported on appeal) goes to show how there is always a litigation risk. Thankfully now, the South African courts are again “satisfied that it is to be considered as if the insurers had not paid a [Rand]”.