Warning
Info
Warning
Info
Simple English definitions for legal terms
risk-stops-here rule
Read a random definition: perpetual statute
A quick definition of risk-stops-here rule:
The risk-stops-here rule is a principle in insurance that says an insurer cannot recover from someone whose rights are equal or better than theirs. This means that if someone else's actions are not worse than the insured's, the insurer cannot seek compensation from them. The rule also states that an insurer can only use subrogation against someone whose actions are worse than the insured's.
A more thorough explanation:
The risk-stops-here rule is a principle in insurance that states an insurer cannot recover from anyone whose equities are equal or superior to the insurer's. This means that if someone else's rights or interests are just as important as the insurer's, the insurer cannot take legal action against them to recover any losses.
For example, let's say a person's car is damaged in an accident caused by another driver. The person's insurance company pays for the repairs and then seeks to recover the costs from the other driver's insurance company through subrogation. However, if the other driver's insurance company can prove that their client was not at fault or that their client's rights are equal or superior to the person's insurance company, the risk-stops-here rule would prevent the person's insurance company from recovering any costs.
The risk-stops-here rule is based on the doctrine of superior equities, which means that the rights of one party cannot be superior to the rights of another party. This principle ensures that all parties are treated fairly and that no one is unfairly disadvantaged.