RSA v Textainer and subrogated recoveries in a Tree Law context
When an insurer has paid out on a claim and there is a chance of recovering money from a third party, everyone’s attention quite naturally turns to the same practical question:
If money is recovered, who gets it first — the insurer or the insured?
That question matters in all sorts of property damage claims. In our world, it can arise where a tree has fallen, roots have caused damage, defective tree work has created loss, or a landowner, contractor or neighbour may be responsible. The insurer may have paid for some of the damage, but the policyholder may still be out of pocket for an excess, professional fees, uninsured losses, business interruption, loss of amenity, or other costs that were not covered by the policy.
The Court of Appeal’s decision in Royal & Sun Alliance Insurance Plc & Ors v Textainer Group Holdings Ltd & Ors [2024] EWCA Civ 547 is a useful reminder that insurers do not always get first bite of the cherry.
The case was not about trees. It was about shipping containers and a substantial insurance programme. But the principle is very relevant to any recovery claim where the insured has suffered more loss than the policy has covered.
The Short Point
The Court of Appeal confirmed the “top down” approach to recoveries.
In plain English, where the insured has not been fully indemnified, recoveries from a third party are generally applied first to the uninsured part of the loss sitting above the insured cover. Only after that does the recovery move down through the insured layers.
The Court described the main issue as whether insurers, having paid under excess of loss policies, were entitled to a proportionate share of later recoveries, or whether those recoveries should be applied first to uninsured losses under the “top down” approach from Lord Napier and Ettrick v Hunter [1993] AC 713.
Why Does This Matter in Everyday Claims?
Subrogation can sound technical, but the idea is simple. If an insurer pays a claim, it can usually step into the insured’s shoes and pursue the party responsible for the loss.
For example, in a tree-related claim, an insurer may pay for repairs after a tree failure, root-related damage, or negligent works. The insurer may then want to pursue the neighbour, landowner, contractor, tree surgeon, local authority, or another responsible party.
But the insured may also have losses that were not paid by the insurer. That might include the policy excess, uninsured professional fees, additional repair costs, loss of use, consequential losses, management time, VAT that cannot be recovered, or other out-of-pocket losses.
The practical issue is whether the insurer can say: “We paid most of the claim, so we should receive most of the recovery.” RSA v Textainer says: not necessarily.
What Happened in Textainer?
Textainer had insurance for losses arising from container lessee default. The programme included a US$5m retention, a US$5m primary policy above that retention, and several excess layers providing cover up to US$80m above the retention.
The loss arose after Hanjin Shipping entered receivership and then bankruptcy, with around 113,000 Textainer containers in Hanjin’s possession at the relevant time.
Textainer’s overall losses were agreed at about US$101.86m. It received US$75.1m from insurers, leaving uninsured losses of around US$21m, plus the US$5m retention. Textainer later recovered money from Hanjin’s bankruptcy estate.
The insurers argued that they should receive a 39.3% share of that later recovery, because they had insured US$40m of Textainer’s total loss. Textainer said no: the recovery should be applied “top down”, meaning Textainer’s uninsured losses should be made good before those insurers could take a share.
What Did the Court of Appeal Decide?
The Court of Appeal sided with Textainer.
Phillips LJ held that the real nature of the cover was insurance against particular layers of loss. Because of that, the policies should “pay up and recover down”.
If recoveries were shared proportionately between the insured and the insurer, Textainer would not receive the full indemnity for which it had contracted and would be worse off simply because the recovery came after the insurance payment rather than before it. The appeal was dismissed.
The Tree Claim Analogy
A simple tree claim example may help.
Suppose a tree failure causes £100,000 of damage. The insurer pays £60,000 under the policy. The insured is still left with £40,000 of uninsured loss. A recovery claim is then brought against a negligent contractor and £30,000 is recovered.
The insurer may understandably want some or all of that £30,000 back. But if the insured has not yet been fully made whole, the “top down” approach may mean the £30,000 goes first to the insured’s uninsured loss, not to the insurer.
That is not because the insurer has no subrogation rights. It does. But subrogation is not intended to put the insurer in a better position while the insured remains short.
What About the Policy Excess?
This is the bit to handle carefully.
An excess or retention is not always treated in exactly the same way as other uninsured losses sitting above the insured layer. In layered insurance, the retention may sit at the bottom, not the top.
That said, in many smaller property and tree claims, insurers may agree commercially that the insured’s excess should be repaid first from any recovery. That can be sensible, client-friendly and practical, particularly where the insured’s cooperation is needed to pursue the claim.
The key point is this: do not leave it vague.
If the insured’s excess is to be repaid first, say so in the recovery authority or settlement agreement. If it is to sit behind the insurer’s outlay, say that too.
Why Recovery Authorities Matter
For insurers, brokers, managing agents, landowners and policyholders, the lesson is a practical one.
Before a subrogated claim is pursued in the insured’s name, everyone should be clear about who controls the claim, who pays the legal costs, who bears adverse costs risk, what uninsured losses are being included, whether the policy excess is included, and how any recovery will be split.
That should be recorded in a short written authority at the start.
This is especially important in tree claims because the insured is often needed as an active participant. They may need to provide photographs, historic correspondence, arboricultural reports, invoices, access, witness evidence, and sometimes a statement of truth. It is much easier to secure that cooperation when the insured understands how they will benefit from the recovery.
Evidence Still Matters
The Court of Appeal also made an important evidence point. The insurers argued that losses should be treated as having occurred evenly and regularly over time. The Court rejected the idea that there is a general presumption to that effect. If a party wants the court to infer a particular pattern of loss, it needs evidence to support it.
That is a useful reminder for tree cases too.
Losses rarely come in neat boxes. There may be immediate damage, temporary works, investigations, monitoring, engineering input, arboricultural advice, phased repairs and later consequential loss. If allocation matters, evidence matters.
Our Takeaway
RSA v Textainer confirms that insurers should not assume that a subrogated recovery will automatically be divided pro rata.
Where the insured has not been fully indemnified, the insured’s uninsured losses may come first. The insurer’s right of recovery remains important, but it must be applied consistently with the indemnity bargain and the established “top down” approach.
For tree-related recovery claims, the message is simple: identify the uninsured losses early, agree the recovery waterfall in writing, and make sure the insured knows where they stand before the claim is pursued in their name.
That avoids awkward conversations later — and gives the recovery claim much firmer roots from the start.
Case References
- Royal & Sun Alliance Insurance Plc & Ors v Textainer Group Holdings Ltd & Ors [2024] EWCA Civ 547
- Lord Napier and Ettrick v Hunter [1993] AC 713
Note: This article is general commentary only and is not legal advice. Specific recovery and subrogation issues should be considered against the wording of the policy, the recovery agreement and the facts of the claim.
