Who has the right to control a subrogated action and how must the proceeds of such an action be distributed as between the insurer and insured?
At common law an insurer has no right of subrogation until the insured has been fully indemnified. Pursuant to section 81 of the federal Marine Insurance Act, this common law rule has been modified such that an insurer is subrogated to all of the rights and remedies of the insured upon payment of a loss. This right of subrogation entitles the insurer to commence action against the wrongdoer in the name of the insured. However, where the insured has not received a full indemnity, either because of the existence of uninsured losses or because of the application of a deductible, the insurer does not have the right to control the action. At common law an insured who has not been fully indemnified retains the right to hire and instruct lawyers and to control the litigation. The insured who does so owes a duty to the insurer to pursue the claim with diligence and in good faith. The distribution of the proceeds from a subrogated action as between the insurer and insured is dictated by section
