Insurance subrogation and assignment under English and Korean law in practice

Choosing English law for a marine insurance contract changes how an insurer can pursue recovery after paying a claim. Subrogation alone does not transfer the insured’s rights or permit proceedings in the insurer’s own name. Korean Supreme Court decisions highlight the importance of a valid assignment, precise documentation and careful consideration of the laws governing insurance and the assignment agreement.

This blog post is an English translation of a Korean-language column the author contributed to the Korea Shipping Gazette on 3 November 2025. The translation is the author’s own; in the event of any discrepancy, the Korean original prevails.

When English law governs the insurance contract

“This insurance is subject to English law and practice.” Most marine insurance contracts concluded in Korea also designate English law as their governing law. Once English law is chosen, however, it is necessary to set aside, for a moment, the instincts acquired under Korean insurance law.

[This column concerns cases in which English law governs the insurance contract as a whole. Where English law governs only questions of the insurer’s liability, issues such as the formation and validity of the insurance contract itself may be governed by Korean law.]

Subrogation under Korean and English law

Under the Korean Commercial Act, upon paying an insurance claim, the insurer acquires the insured’s rights up to the amount paid. Because those rights pass automatically by operation of law, a letter of subrogation is, in practical terms, largely a document of “confirmation”. The insurer can therefore bring recovery proceedings immediately in its own name after making payment.

English law, however, takes a different approach to insurance subrogation. Subrogation under the Marine Insurance Act does not mean a transfer of rights; it means that the insurer becomes entitled to enforce the insured’s rights and remedies in the insured’s name.

Although the same term “subrogation” is used, the rights themselves remain with the insured, and the insurer may exercise them only in the insured’s name. If the insurer wishes to sue in its own name, it therefore needs a separate assignment. Up to this point, these principles of English law have already been confirmed in Korean case law and are widely known in Korea.

The Supreme Court decision on an insufficient letter of subrogation

A Supreme Court judgment delivered in July 2024 addressed the procedural and legal questions that follow from those principles. The case can be outlined as follows.

A Korean importer took out cargo insurance on ICC(A) terms for a shipment of generator and radiator equipment. After the goods suffered impact damage during carriage, the insurer paid the claim and obtained a letter of subrogation from the insured. The letter contained wording familiar in Korean insurance practice: “The insurer is authorised to bring claims and proceedings in the insured’s name against the carrier and other parties.” Relying on this document, the insurer brought recovery proceedings against the carrier in its own name.

The Supreme Court held that, where an insurance contract has a foreign element, the question whether an insurer acquires the insured’s rights against a third party by paying the insured under the insurance contract is governed by the law applicable to that contract, which governs the legal relationship between the insured and the insurer. It therefore assessed the requirements and effects of subrogation in the case by reference to English law, the governing law of the cargo insurance contract.

The conclusion was straightforward. Under the principles of the Marine Insurance Act, payment of the insurance claim did not transfer the insured’s damages claim against the third party to the insurer. The Court held that the letter of subrogation in that case did not identify the choses in action to be assigned, and that it was difficult to conclude either that the insured intended to assign those rights absolutely or that an intention to transfer them immediately and irrevocably had been clearly expressed. It ultimately held that, because the requirements for assignment under English law had not been satisfied, the insurer could not sue in its own name in that case.

Insurance practice must evolve with the law

Korean insurance practice has been changing since that Supreme Court judgment. Recent practice includes obtaining a combined “letter of subrogation and assignment agreement” when paying the insurance claim, or using an entirely separate assignment agreement.

My suggestions for this practice are as follows: the assignment agreement must specifically identify the claims to be assigned. It must “absolutely assign” the relevant rights and claims to the insurer and must state: “This assignment takes effect immediately and is irrevocable.” A procedure for giving written notice to the debtor must also be in place.

Choosing the law governing the assignment

In addition, a recent Supreme Court judgment held that the law governing insurance subrogation need not necessarily be the same as the law governing the assignment agreement. It is therefore also possible to structure the assignment agreement so that it is governed by Korean law, reducing the burden associated with the requirements for assignment under English law. Even so, it should be borne in mind that insurance subrogation remains subject to the governing law of the insurance contract.

An objection based on a trust for litigation

An objection may also be raised in the proceedings that the assignment agreement between the insurer and the insured constitutes a trust for the purpose of litigation. In my view, however, the prohibition on such trusts is unlikely to apply, because the assignment rests on the insurer’s pre-existing right of subrogation under the insurance contract and is not made for the purpose of litigation itself.

Conclusion

The difference between English and Korean law on insurance subrogation is not unfamiliar to marine insurance practitioners. Yet a moment’s inattention can mean getting the very first step wrong. Even the letters of subrogation long used widely in practice are no longer a safe option. Just as existing legal relationships need to be redefined to reflect new realities, practice too needs to evolve with the changing law.

K. M. Choi is a partner at Law Offices Choi & Kim, qualified in the Republic of Korea, with over ten years in shipping disputes, marine insurance and major casualties in Korean waters. He can be reached at kmchoi@choikim.com or on LinkedIn.

This article describes Korean law and practice in general terms and is not advice on the law of any other jurisdiction. The law is stated as at the date of the original Korean publication and may since have changed, and nothing here creates a lawyer–client relationship.