Subrogatory recourse in CAR insurance: who is a liable third party?

Subrogation in the CAR context

Article 95 of the Belgian Insurance Act governs subrogation:

• The insurer who pays compensation is subrogated to the rights and legal claims of the insured or beneficiary.
• This right of recourse applies only against liable third parties.

Subrogation requires, first of all, that the insurer has actually paid compensation. In that case, the insurer is subrogated, up to the amount of that payment, to the rights and legal claims of the insured or beneficiary against the liable third parties. In practice, the subrogated insurer exercises the claim that belonged to the insured or beneficiary.

Under Article 95 of the Insurance Act, the subrogated insurer only has a claim against the “liable third party” and not against the insured party themselves. The interpretation of the term “liable third party” is therefore crucial for determining whether recourse is possible.

This question arises frequently in the context of CAR insurance.

A CAR insurance policy covers damage to works under construction. It is, in essence, a property insurance (commonly known as “Section 1”). Its purpose is (i) to avoid disputes about causation and liability during the construction process, and (ii) to prevent delays caused by litigation between the parties on site. In addition, CAR policies often include optional coverage for extra-contractual liability and neighbourhood nuisance (known as “Section 2”).

CAR policies are usually taken out (for a specific project or as an annual policy) by the project owner or the main contractor, for the benefit of all construction actors active on the site. As a result, the policy includes several parties who are all designated as insured, such as:

• the project owner,
• the main contractor,
• subcontractors,
• architect(s),
• engineers and other design offices.

When damage occurs and the liability of one of these construction actors (other than the project owner) is at issue, the question becomes whether that actor is a liable third party toward the project owner or the subrogated CAR insurer within the meaning of Article 95.

The key element: the insurable interest

It is not sufficient that a construction actor is listed as an insured party in the CAR policy. That fact alone does not prevent them from being regarded as a liable third party under Article 95 of the Insurance Act.

It is essential to determine, case by case, whether the construction actor had an insurable interest in relation to the damage.

The status of “insured” under Article 95 is not assessed solely on the basis of the actual benefit received under the policy. An insurable interest under a property insurance contract may also exist for someone who does not hold a real right in the property, but who nevertheless has a legitimate interest in its preservation.

The Court of Appeal examined the position of the engineer in the CAR policy. The Court did not confine itself to the wording of the policy but assessed whether the engineer had an insurable interest.

The Court concluded:

• The CAR insurer intervened under Section 1 to cover the damage to the building.
• The project owner, as owner of the property, had an insurable interest in that damage.
• The other construction actor (in this case, an engineer) did not have any insurable interest in the preservation of the building.

The mere fact that the actor was listed as an “insured” in the policy did not change this. In the context of the compensation paid under Section 1, the engineer remained, vis-à-vis the CAR insurer, a liable third party.

As a result, the CAR insurer may exercise a subrogated right of recourse under Article 95 against the engineer and their liability insurer.

Waiver of recourse and other clauses in the CAR policy

Many CAR policies contain a waiver of recourse clause, often in favour of all parties designated as insured, except in cases of wilful misconduct or fraud. Sometimes the waiver applies only insofar as the liable party cannot transfer the loss to another insurance policy or another liable party.

Important practical points:

• A general designation as insured is not always decisive.
• A waiver of recourse is often qualified by additional conditions (such as the possibility of shifting liability or loss to another insurer).
• The analysis must be carried out per loss event, per coverage section, and per involved party.

Conclusion: who is a liable third party?

In summary:

• Subrogation grants the insurer a right of recourse against liable third parties, not against its own insured.
• Whether a party is an insured or a third party depends on the insurable interest and the specific coverage, not merely on the wording of the policy.
• An engineer who has no insurable interest in the damaged building remains a liable third party vis-à-vis the CAR insurer.
• Waiver clauses must be read carefully, together with any limiting conditions.
• A thorough assessment of each party’s insurable interest can be decisive for the outcome of a recourse claim.

Would you like to assess the recourse options in a specific CAR file?

At Amankwah Law, we support insurers and claims handlers in complex construction and CAR matters. We identify the involved parties, analyse insurable interests and recourse options, and translate these into a clear and practical action plan.

If you would like a file review or want to discuss your recourse strategy, feel free to get in touch.