Subrogation and regress in Latvian insurance law: historical development of the institutes and comparison with English doctrine

In Roman law, cession (from Lat. – cedo – to be assigned) (Podosinov et al., 2001, p. 48) initially served as the remedy of a creditor to entrust another with the representation of the creditor's interests in the court through the mandatum agendi ⁽¹⁾ – this process later was named as cessio actionum (Torgāns, 2014, p. 136). Considering that Roman law did not recognise the change of subjects in obligation, cession was an exception justified by so-called utilitas – the need for economic turnover (Dernburg, 1900, p. 160).

Cessio actionum has existed in the tripartite relationship of suretyship, which is the primary source for historical analysis, as insurance had not yet been developed accordingly at this stage of legal development. Suretyship is a personal type of guarantee of obligation which obliges the surety ‘to be liable for the debt of a third person to a creditor’ as envisaged by Civillikums (CL) (Latvijas Republikas Civillikums, 1937, Art. 1692).

The concept of subrogation, for its part, is closely related to this type of obligation: in such relations, the third party (surety) discharges the principal debt, and thus, the future position of the surety is questioned because performance originally would extinguish the principal obligation. The Romans have solved the problem with the juridical fiction. Marasinghe alleges that if the cessio actionum had not happened before the payment (from surety to the creditor), the obligation after payment was destroyed in toto, and there was nothing left to cede. However, otherwise, there might have been a cessio actionum in the form of a price for the sale of the right of action from the cedent; therefore, the obligation was not discharged (Marasinghe, 1975, pp. 50–52). Nevertheless, this construction was neither convenient nor safe for the implementation of the parties' will, as the assignment agreement could be unilaterally revoked by the assignor or terminated upon his death (Torgāns, 2014, pp. 136–137).

Therefore, the principle of beneficium cedendarum actionum ⁽²⁾ (literally, as Leisegang (1993) notes – the benefit of cession of action [pp. 38–39]) was introduced by Iustinianian codification (Scott, 1932, Nov. 4.1 [a535]; Nov. 4.1 [in fine]). The requirement of cession was therefore abolished; the creditor did not have to declare transfer of claim, nor was surety demanded for cession – it emerged ipso iure, thus resulting in subrogation or cessio legis (Meier, 2012).

The historical development of cession led to the emergence of cessio legis (cession by law), which is a doppelganger of legal subrogation and likewise has an evident derivation from beneficium cedendarum actionum (Dieckmann, 2012, p. 65). Nonetheless, modern legal systems employ subrogation and cessio legis in distinct ways.

The term ‘subrogation’ in its modern sense, first appeared in the French ancien droit. In 1609, an edict of Henry IV combined two Roman institutes in a fictional revival of a claim not extinguished by third-party performance, calling it subrogation (but concerning agreement with debtor – subrogation in agreement with creditor emerged only in the XVIII century) (Godeme, 1948, p. 473).

Overall, subrogation has been developing as an ‘equitable remedy’: for instance, in the German Empire, it was seen as a derivative of aequitas (Dieckmann, 2012, pp. 66–67). French jurist Pothier (1806) justified subrogation accordingly: ‘obligation of the creditor to cede his actions is founded upon the rule of equity’ (p. 320). English law articulates subrogation as a creation of English equity courts. ⁽³⁾

Despite the ipso iure character of the term described before, several jurisdictions imply the regime of contractual subrogation. In France, where the institute of cession is subject to greater restrictions, the contractual (conventionnelle) subrogation is equivalent to contractual cession in Germany. Thus, for cession under Code civil (CC), the debtor's approval is required; the creditor has no priority in the event of partial payment, and the creditor is obliged to provide a warranty that the cedable claim exists (Meier, 2012). CC, in addition, provides a legal subrogation.

Contrary to ius commune and classical Roman law, the French approach to subrogation allocates between assignment and performance, that is, it occurs as an exceptional performance and does not extinguish the obligation (Godeme, 1948, p. 473).

German Bürgerliches Gesetzbuch (BGB), in turn, is a continuation of beneficium cedendarum actionum – cessio legis – cession of claim imposed by law (Germany, 2021, §74); the obligation is not terminated but automatically transferred. In Germany, there is no subrogation in the French sense, ⁽⁴⁾ perhaps because contractual cession in BGB is not so restricted (Meier, 2012); let it be emphasised that, contrary to Germany, the CC provides only contractual cession of claim – cession de créance (France, 2025, Art. 1321). The similarity between subrogation and cessio legis is also confirmed by Section 67 of the German Insurance Contract Act, which transfers the victim's claim to the insurer (Germany, Versicherungsvertragsgesetz, 2023, § 67).

In England, there is both contractual and legal subrogation; legal subrogation is implied in the indemnity insurance and suretyship. Contractual subrogation applies when the insurer seeks a better position in the event of an insured event. For instance, an insurer may include a subrogation clause in the non-indemnity insurance contract (Mitchell, 1993, pp. 377–379).

English law also distinguishes an institute of assignment, which is subject to either statutes or equity. However, the common law assignment per se is broader than the continental concept of cession, as it implies not only the transfer of the claim but also the transfer of property rights to the assignee (Prokofyev, 2012, p. 134).

The subrogation is also regulated by Rome I and Rome II regulations: both imply contractual subrogation (Art. 14 for former and Art. 19 for latter) and only Rome I Art. 15 – the legal subrogation (European Union, 2007a, b).

Regress is a secondary, sui generis obligation, by virtue of which regredient has the right to demand back from regressat a certain sum of money paid by the regredient or received by the regressat in fulfilment of the primary obligation connected to the performance of the third party (Golmsten, 1913, p. 158). In Roman law, apart from fictitious purchase of action, surety could have a regressive right in the following cases: 1) action's transfer in mandate for loan rendering (mandatum pecuniae credendae); 2) remedy for simple surety-mandator – if accepted by debtor (actio mandati contraria) and, if not accepted – 3) actio negotiorum gestorum contrariria (Shirvindt, 2006, pp. 239–240). These three regimes were combined in the surety's regressive rights by modern codifications.

For instance, in French law, the subrogation is also distinguished from regressive rights in cases when a third party without an authority would perform a debtor's obligation or if the third party did not act in the name of debtor (discharging the latter). These cases are negotiorum gestio or unjust enrichment (Whittaker, 2000, text after note 35). In such situations, regressive right would be based on a separate relationship between the third party and the debtor (such as voluntary payment, mandate). It would not include the creditor's rights (e.g. on securities), and the third party would sue in his own name (Whittaker, 2000, text after note 58). These types of regress could be articulated as internal relations between the regredient and regressat.

The second ground for regress could be considered as the relations emerging from (or as) subrogation. Hence, there are two approaches in this regard. The first considers subrogation as a specific type of regress – derivative regress (recourse), and interprets in such manner the primary beneficium cedendarum actionum (Shirvindt, 2006, pp. 238–239). The second approach is only as a basis for the regress. Golmsten suggests that, in the case of subrogation, regress yields to the right of primary obligation (Golmsten, 1913, p. 183). Nevertheless, he also alleges that codifications apply in the first position, not dividing two institutes.

Presently, Latvian insurance law is governed by several statutes: the Insurance Contract Law (ICL; Latvijas Republikas, 2018) and the Compulsory Civil Liability Insurance of Owners of Motor Vehicles Law (OCTA Law, Latvijas Republika, 2004). Additionally, the antedated law On Insurance Contracts (OIC; Latvijas Republikas, 1998/2018) continues to hold significance, relative to the outcomes of the 2018 insurance law reform. Nonetheless, the Civil Law remains a fundamental codification of private law, which consequently affects the field of insurance. Therefore, CL should be examined prior to analysis of the lex specialis.

The official English translation of CL (Latvijas Republikas Civillikums, 1937) contains eight mentions of subrogation action (regress in Lv.) and one mention of recourse in indirect meaning (vērsties tikai pret pārdevēju – Lv. recourse only against the seller) (Art. 2010).

The first mention of regress in CL (Arts. 1705, 1706, 1708, 1709 and 1711) appears in the context of suretyship. According to Art. 1704, surety does not overtake the claims and objections arising from the legal relationship; the surety may require security from the principal debtor only in the case of doubts about the latter's solvency (Latvijas Republikas Civillikums, 1937). The debtor may demand indemnity from surety under Art. 1708 (Latvijas Republikas Civillikums, 1937). If the surety discharges the debt without informing the principal debtor and the latter pays too – the surety is eligible to demand regress from the creditor; if the principal debtor pays in the same case – surety may ask for recovery from the principal debtor. The principal obligation is terminated after either the obligation is discharged, or the principal debtor is released (Latvijas Republikas Civillikums, 1937, Arts. 1710, 1712).

Therefore, current suretyship regulation under CL implies only the possibility of regressive right, which is a claim of autonomous nature (not a subrogation), and hence, should be translated accordingly. However, still considering the fact that CL applies the model of subrogation in suretyship (Fillers, 2020, p. 257), the proper definition and wording should have been used in the context of Arts. 1704, 1705 and 1711 addressing the subrogation action; but the regulation of regress could have been retained in Arts. 1708 and 1709; and in Art. 1708, because regressive action could have brought the principal against surety. In Art. 1709, regress is based on personal obligation because the primary obligation was extinguished by the debtor's payment.

Furthermore, the subrogation action is used in the CL regulation of novation. Novation is a change of the subjects in an obligation upon the latter's termination (Study Group on a European Civil Code & Research Group on EC Private Law, 2008, p. 500). Thus, the term regress should be used in Art. 1877, since the debtor is substituted. Similarly, in the case of Art. 1880, where a regressive claim is possible for the new creditor (after novation) against the former one. In both situations, the previous obligation is terminated; therefore, no subrogation is possible.

Lastly, Art. 338 provides a regress from Orphans and Custody Court to municipality if the latter indemnifies a ward whose interests were infringed by the Court (Latvijas Republikas Civillikums, 1937). It definitely could be regulated as subrogational procedure, since the ward's claim is transferred to the municipality.

Focusing attention on the norms directly impacting the research subject, the ICL and OCTA Law is explicitly highlighted. The former constitutes a principal legal instrument prescribing general insurance regulation, while the latter specifically addresses compulsory motor vehicle liability. Additionally, it is pertinent to note that the insurance law underwent reforms in 2018. Prior to this revision, the OIC existed in place of the ICL. The OIC Art. 40 contained eight articles regulating the emergence, statute of limitations, impossibility and other aspects of regressive claim (lv. – regresa prasība). ⁽⁵⁾ Art. 40 (1) of OIC (Latvijas Republikas, 1998/2018) states:

The insurer, which has paid the insurance indemnity, takes over the insured's right of claim against the person responsible for the losses in the amount of the paid pecuniary sum, (…)

Therefore, in this context, the ‘regressive claim’ pertains to a regime that may be identified as the subrogation action – a claim by the insurer against the tortfeasor up to the amount of indemnity paid to the insured. Therefore, prior to the 2018 reform, Latvian insurance law did not directly recognise the term ‘subrogation’ (Rone, 2019, p. 143). Nonetheless, such claims ought to have been categorised as a subrogation action or, in German terminology, an assignment of the insured claim (Versicherungsvertragsgesetz, 2023, § 86), as they align with the legal notion of subrogation found in Latvian academic sources (Autoru kolektīvs, 1998, pp. 247–248).

However, on 1 July 2018, the new law entered into force, providing definitions of the two terms: subrogation rights (lv. – subrogācijas tiesības) and a separate article regulating a previously non-existent regime of regress (regressive claim), calling it a subrogation action (lv. – regresa tiesības). The new law's definition of subrogation rights is fully coherent with the definition of regress claim under the OIC (Latvijas Republikas, 1998/2018 Art. 40). Thus, Art. 1(1) point 1 of the ICL (2018) provides a definition for subrogation action that closely resembles the definition of a regressive claim as outlined in OIC Art. 40. However, it is specifically limited to civil liability insurance cases arising ex lege or from the contractual liability of the parties.

It is important to note at this juncture that the ICL exhibits inconsistency with the established doctrine of subrogation. It equates a term denoting a claim against the insured with a subrogation action, despite the widely accepted principle that subrogation cannot be pursued against the insured themselves, as elaborated in the third section of this paper. Notwithstanding the ICL's innovative approach, the OCTA Law was not addressed by the 2018 reform and contains only a regulation of regress. Thus, Art. 41 of OCTA Law (Latvijas Republika, 2004) contains provisions on insurers' and Motor Insurers' Bureau's rights for claim regress from different categories of persons (e.g. driver, motor holder, legitimate driver). That is to say, the law uses the term subrogation action (lv. – regresa prasība); therefore, the situation here is identical to the ICL – the collocation subrogation action is used to regulate regressive claim. The definition of regress in law is traceable, upon analysis of the provision; it is similar to the ICL definition of subrogation action (which should be understood as regress).

It is important to emphasise that the official translation of the actual acts employs the term ‘subrogation’ to refer to regressive action (regresa prasība in OCTA Law) and regressive right (regresa tiesības in the ICL).

The conclusion is as follows: the understanding of subrogation within Latvian insurance law has evolved from its previous interpretation in the OIC, where both terms were amalgamated under the term regressive claim, to now recognising two distinct classifications institutes. Under the ICL, the subrogation right (lv. – subrogācijas tiesība) and the regressive claim (lv. – regresa prasība) constitute two parallel legal concepts applied in distinct circumstances (against a third party and against the insured). However, there remains no explicit explanation regarding the interrelation of these two institutes.

The word regress as such derives from the Latin word regressus – the movement in the opposite direction (Podosinov et al., 2001, p. 286). It was already known in pre-war Latvian law (Latvijas Senāta Civilā kasācijas departaments, 1936, pp. 216–218).

The most comprehensive research in regard to regress was done by Latvian pre-war legal scholar Vīnzarājs. Analysing Private Law of the Baltic Provinces (PLBP; Vietējo Civillikumu Kopojums 1928, Arts. 3461–3465, 1447 and 4531), he has concluded that, in Roman law, there were two categories of cession: contractual and by operation of law (or cession legis) (Vīnzarājs, 1932, pp. 245–246). The latter is found in the Roman concept of actio utilis suo nomine; this type of action implied the cedent's right to sue the defendant ipso iure, ‘from his own name’ – without a mandate (Vīnzarājs, 1932, pp. 248–250).

Furthermore, Vīnzarājs considered that cessio legis was a ‘method of juridical art’ regulating regress – cession was used by the court for the purpose of regress because there was no separate regime for such purposes (Vīnzarājs, 1932, pp. 252–254). He concludes that regressive action as a remedy may be applied in each particular case by the court, therefore there is no need for cessio construction in modern law.

Today, the independent nature of regress and cession is obvious. Thus, Latvian legal scholar Brants (2017) states that regress, contrary to cession, is an independent obligation; on the other hand, cession (also subrogation) is the change in subjects of the existing obligation. That is why, regressive claim acquires a new statute of limitations (e.g. insurer's regress from insured is valid 3 years under the ICL [2018, Art. 54]) contrary to cession (and subrogation). Nevertheless, Brants follows the approach of Vīnzarājs, stating that the relation between surety and principal should be based solely on the regressive right, excluding cessio legis. He argues that, under cession, surety cannot recover a payment for the forfeit's guarantee from the debtor (because accessories are not cedeable), or recover a paid sum for moral damage.

However, the abovementioned aspects of cession do not contradict its possibility in suretyship: the surety may recover the payment for moral damage by way of regress and the main debt under cessio legis or subrogation. On its part, the case of forfeit's guarantee might be considered as a flaw of cession. Considering the advantages and limitations of the application of cession (subrogation) in suretyship, it should be noted that subrogation facilitates economic turnover and is profitable for all three parties (Sinaiskiy, 1926, p. 139; Trepitsyn, 1914, p. 220).

Despite the nature of both institutes being in the transfer of a creditor's action against a debtor to a third party (surety or insurer), they differ in a range of aspects. Therefore, it is crucial to identify the distinction between subrogation and cession. Thus, considering the theoretical works on the topic, the two authors have most precisely defined the difference between the abovementioned concepts: (Sinaiskiy, 1926, pp. 138–139; 1917, p. 99; Trepitsyn, 1914, pp. 225–226). Summarising their views, the seven points are articulated as follows:

• Cedent has an autonomous right to claim – the subrogee steps into the rights of the creditor.

• Subrogation is subject only to pecuniary obligation.

• Subrogee may satisfy the creditor fully or partially. In the latter situation, the creditor has an advantage in satisfaction of the unpaid part of the debt.

• Subrogee may demand only the satisfaction from the debtor in the amount he discharged. Cessionary may demand the total amount of the obligation (even if he acquired the claim at a discounted price).

• Subrogee retains the right of regressive action against debtor on the basis of the reason the debt was paid ⁽⁶⁾ (subragee also overtakes the securities of the creditor).

• There is no need for debtor's notification by subrogee.

• Cession requires guarantees from the cedent that the obligation exists; in contrast, the subrogee, performing a payment, acknowledges the existence of the subrogated obligation.

What matters for so-called cessio voluntaria and contractual subrogation: it is obvious that regimes should be divided and regulated separately. But with regard to cessio legis and legal subrogation, there is no need, because the aforementioned differences do not matter in cases where the obligation is changed ipso iure, mainly because neither requires an act of transferring the claim (Bukovsky, 1914, p. 1418). That is, all differences mentioned in the list above, except the second, third and fourth, are not relevant. Therefore, subrogation by operation of law should be conceived as a pecuniary cessio legis of the claim, limited to the amount of the subrogee's discharge, whether partial or full, relative to the original value of the claim.

Both concepts were recepted by previous civil law codification: according to Sinaiskiy, PLBP has regulated subrogation as cessio legis in Arts. 1477 and 4531 (Sinaiskiy, 1926, p. 139). In addition, Bukovsky indicates Art. 2286 as legal cession (Bukovsky, 1914, pp. 1417–1488); and Vīnzarājs openly states that, in Arts. 3461–3466, cessio legis is implied (Vīnzarājs, 1932, pp. 246–247).

Latvijas Republikas Civillikums (1937) explicitly governs legal cession in Art. 1793, point 1: stipulating that the claim may be transferred to a new creditor from the previous one through cession, by operation of law, without the expression of the will of the original creditor. Therefore, under the ICL, the norms applicable to subrogation rights are equated with cession, considering that the former arises ipso iure; this could be interpreted as meaning that it is equated with the norms of legal cession (Alfejeva, 2023, p. 125; ICL, 2018, Art. 45(5)).

Nevertheless, under CL, subrogation non-expresis verbis is found in Art. 1704, which implies that the claim of a creditor against the principal debtor shall be transferred to the guarantor in such amount as the guarantor has satisfied the creditor; for instance, Būmanis acknowledges that it is subrogation (Būmanis, 1933, p. 157). Moreover, Fillers states that this provision is a borrowing from the Swiss Civil Code, which, respectively, regulates subrogation (Fillers, 2020, pp. 257–258).

Regarding contractual subrogation, the performance of the third party described in Art. 1815 may be considered as a possible ground for its implementation. Furthermore, in such cases, CL Art. 1797 envisages a possibility of a cession contract between a third party and a creditor (Grūtups, 1998a, p. 287). However, given the partial satisfaction, the application of subrogation would be more appropriate in this case, for example, because the subrogee retains additional regressive rights against the debtor. In addition, Karkliņš's proposal to introduce legal subrogation into CL by amending Article 1815, is notable (Kārkliņš, 2024).

In Latvian doctrine, subrogation is defined as the performance of an obligation in lieu of another acquiring a claim against the debtor in the amount performed, which occurs on a contract or statute basis (Autoru kolektīvs, 1998, pp. 247–248). This definition corresponds to the pre-analysed legal norms in insurance, except for the possibility of a contractual agreement as a basis for subrogation.

Nevertheless, Latvian scholars have criticised subrogation by treating it as a complete transfer of the original obligation and contractual relation to a new creditor (Torgāns, 1996, p. 40). Under this view, ‘subrogation’ in the Civil Law cannot exceed the legal consequences of cession and is thus confined by the cession framework (Grūtups, 1998b, p. 282). Later, Torgāns maintained that parties may agree on subrogation, yet the Civil Law does not regulate it as an independent form of change of creditor (Torgāns, 2007, p. 15). A similar position appears earlier in Vīnzarājs, who argued that cessio legis should not be termed subrogation because it entails the succession of legal positions (Vīnzarājs, 1932, p. 246). This approach was also reflected in the pre-reform case law on insurance-related subrogation (Latvijas Republikas Augstākās tiesas Civillietu tiesu palāta, 2016).

Here, it should be noted that proponents of the above-described approach consider subrogation a universal succession of obligations. The universal succession usually applies in corporate law when companies merge, all rights and claims of the previous companies pass to the newly formed company (Karapetov, 2022, § 1.2.4).

Other legal scholars, such as Mantrovs and Alfejeva, criticise the discussed approach in the context of insurance. In particular, Mantrovs (2016, p. 413) states that OIC Art. 40 regulates subrogation ex lege in insurance. Furthermore, he emphasises the need for the concept in Latvian law:

The existence of the institution of subrogation in Latvian insurance law opens up the possibility of applying (…) international legal norms that contain a reference to the possibility of subrogation (…) [Translation – R.B.]

To sum up, the institute of subrogation has an ambiguous representation in Latvian civil law – it is not expressly regulated by CL; nevertheless, the doctrine and ICL envisage its implementation.

The essence of subrogation is tightly connected to suretyship, and its beginning is found already in the 13th century's Magna Carta of Edward I (1297, as cited in Howard, 1998) – a pivotal act for the history of English statutory law – where the rights of sureties are established as follows:

they shall hold the debtor's lands and rents [in place of obligee] until they have received satisfaction of the debt (…).

The roots of the term are already found in the sixteenth century, when the Court of Chancery developed several principles of subrogation ⁽⁷⁾ as equitable remedy named contribution, which later obtained development in common law courts (Marasinghe, 1975. p. 49). Nonetheless, the first full-scale formulation and justification of the term was given by Lord Chancellor Hardwicke in the 1748 case Randal v. Cockran (1748), where the indemnified insured's recovery from the wrongdoer was regarded as a constructive trust whereby the insurer had to be a trustor. Furthermore, only in 1851 did the term subrogation per se find its place in English law through the francophonic Quebec (The Quebec Fire Assurance Company v. Augustin St. Louis and Molson (United Kingdom), 1851), where the term was first applied (borrowed from French law), and the newfound naming has blended with the principle of aforementioned Randal (Marasinghe, 1976, p. 287).

In the nineteenth century, statutory law followed the judicial practice and codified existed doctrine of subrogation in the Mercantile Law Amendment Act (United Kingdom, 1856) and later in Marine Insurance Act (United Kingdom, 1906, § 79); the latter might be applied to other insurance types and, what is important, provides a notion of subrogation.

Despite the historical background, the origin of subrogation has historically been a subject of debate: some judges maintain that subrogation is a product of equity, whereas others contend that it is a term implied by common law courts within insurance contracts (Lowry and Rawlings, 1999, p. 216). Thus, analysing English legal doctrine, the three types of subrogation are distinguished: 1) equitable subrogation, a judge-made remedy based on fairness and/or elimination of unjust enrichment; 2) contractual subrogation deriving from common law courts (usually written into insurance policies) and may modify equitable rights, for example, subrogation waiver clause (Tyco Fire v. RollsRoyce Motor Cars, 2008); and 3) statutory subrogation – arises from statutes (Wickert, n.d.).

Personal insurance is commonly excluded from subrogation. For instance, in English doctrine, as discussed above, subrogation applies only to indemnity insurance; hence, prima facie, it does not apply to accident insurance or life insurance (Birds, 2010, p. 321). However, the latter insurance forms could also be formed in an indemnity policy; therefore, in such a case, subrogation would also apply to personal insurance (Birds, 2010, pp. 321–322).

In Latvia, in turn, Art. 45 (1) of the ICL (2018) prevents an insurer from having a subrogation action in the case of personal insurance, not enlisting any exclusion from the rule. Thus, Art. 55(3) (2018) allows application of the compensation principle in personal insurance, except for life assurance; nevertheless, it is not subject to subrogation action. Before the insurance law reform, there was a possibility of subrogation in personal insurance cases if the policy included the compensation principle (Rone, 2019, p. 143).

The circle of excluded persons from subrogation differs in two jurisdictions. In Latvia, it is family members: ‘children, parents or spouse of the insured person even if they are guilty of causing the losses,’ excluding cases when ‘caused them due to wrongful intent or gross negligence’ (ICL, 2018, Art. 45(4)). The overly restrictive nature of subrogation in the OIC has been noted by Mantarovs, who describes the inadequacy of restricting other relatives and partners from being ‘immune’ from subrogation (2016, p. 417). The former flaw also exists concerning the individual engaged in an employment relationship with the insured. The legislation enacted in 2018 has not brought about any improvements.

In England, however, the family members are not secured at all. Nevertheless, the better situation applies to the co-insured, subcontractors, tenants and employees against whom the action cannot be brought (Lowry and Rawlings, 1999, pp. 204–206). Moreover, English law allows the inclusion of a subrogation waiver, excluding anyone who is not co-insured from pursuing under subrogation (Lowry and Rawlings, 1999, pp. 206–207).

Article 45 (2) of the ICL provides that if the insurer pays only part of the losses and sues the responsible party within a year, it must inform the insured, who may then join as co-plaintiff or file a separate claim (2018, Art. 45(2)). The existing regulation has a better mechanism of implementing a subrogation action because it abstained from ‘unnecessarily burdensome restrictions’ (Mantrovs, 2016, p. 416) imposed by previous law on the insurer; for instance, not allowing him to take action before the same was taken by the insured, in the case of partial compensation (OIC, Latvijas Republikas, 1998/2018, Art. 40 (2)).

The insurers in England are entitled to subrogation even if they only indemnify the insured under the policy, not compensating for the whole losses (Lord Napier and Ettrick v Hunter, 1993). If insurers have obtained recourse from the third party that exceeds the sum of indemnity the insurer paid for the insured, the latter has the right to demand the arising surplus in order to cover uninsured losses (Birds, 2010, p. 330). The insured may commence proceedings against the wrongdoer before the indemnity is paid (if the insurance contract does not provide otherwise); however, such actions cannot prejudice the interests of insurers, as described in the previous section. If the insurer refrains from pursuing the third party, the insured may freely exercise his own right to do so (Lowry and Rawlings, 1999, p. 209).

Notwithstanding the vast doctrinal developments of the indemnity principle in English law, it is not fully present in Latvian legislation. Thus, the statute does not provide a dictum that the insured shall never be more than fully indemnified: the existing compensation principle under Art. 42 (1) of the ICL provides: ‘[t]he insurance benefit (…) may not exceed the losses caused in the insurance event’ (2018, Art. 42(1)). Therefore, it applies only to uninsured risks or under-insurance and does not consider the wide range of accessories found in English doctrine and described in section 3.2.

Overall, the English approach is structurally broader and more flexible: subrogation is primarily an equitable, law-operated mechanism embedded in a mature indemnity principle, which is further refined through contract and statute. Latvian law, by contrast, places subrogation within a more restrictive statutory framework that limits both its scope (e.g. personal insurance and protected persons) and its conceptual development. This statutory design is reinforced by the comparatively partial formulation of the indemnity principle in Latvia, which lacks the wider doctrinal nuances characteristic of English practice. Consequently, English law offers a more doctrinally integrated system, whereas Latvia's approach remains more formal and constrained.