By Jeffrey Chan and Gabriel Brettell

Hong Kong, 31 August 2026: In a notable judgment, the Court of Appeal has issued valuable guidance on the principles of subrogation in insurance claims. Insurers, property owners, tenants and other potential parties involved in property damage disputes are strongly advised to take note.

The CA’s ruling was made in favour of BC&C’s clients, the two defendants in CAMP 215/2025, [2026] HKCA 1563, and dismisses the plaintiff’s application for leave to appeal. Barring any unexpected developments, it concludes a case which stretches back more than a decade.

For the uninitiated, subrogation is the legal right that allows an insurance company to pay a claim to its policyholder and then pursue the responsible third party to recover those costs. The practice is a necessary part of the sector, as it means faster payouts to claimants and helps insurers keep premiums lower.

The dispute adjudicated by the CA involved claims of water seepage at an apartment block in Kornhill, Quarry Bay. The plaintiff alleged water was leaking into his flat from the defendants’ property on the floor above, thus preventing him from renting out the unit. He cited five separate incidents and sought compensation for repairs to his property and loss of income, plus an order for the defendants to remedy the defects in their flat.

The District Court upheld only the first two incidents and declared that a valid settlement for these had been reached since the plaintiff had subrogated his rights to his insurer, which had accepted HK$16,920 in full and final settlement in respect of the insured losses. Thus, the plaintiff could only claim for the uninsured loss of HK$1,810, this being the policy excess. The defendants indicated their agreement to pay this but the plaintiff refused, after which the District Court ruled the plaintiff could not pursue this claim any further.

The plaintiff sought leave to appeal to the CA on each of the five incidents. In relation to the first two, he argued that the District Court judge had committed two errors: first, that he failed to apply the legal principle that an insurer is subrogated only to the right to claim insured loss, thus the judge should not have held that there was a settlement on the uninsured loss; and second, that the judge failed to properly consider factual evidence showing only the insured loss was settled.

The CA disagreed. On the first point, it said there was “no dispute that the uninsured amount was HK$1,810” and noted that the plaintiff had rejected the defendants’ offer to pay it. The judge had reached “a factual finding” and the plaintiff “could not point to any misapplication” of the law on subrogation. On the second point, the CA declared there was “no basis” to suggest the judge “failed to take into account the relevant correspondences in determining the existence of a settlement”.

With regard to the first two incidents, the CA declared the plaintiff was “not able to show any palpable errors” by the judge in his “evaluation of the evidence and the application of the law”. It also dismissed the plaintiff’s arguments concerning the remaining three incidents.

Further, as it considered the plaintiff’s application to be “totally without merit”, the CA issued an order under Order 59, rule 2A(8) of the Rules of the High Court to prevent him requesting a reconsideration of its decision at an oral hearing. The CA also ordered the plaintiff to pay the defendants’ costs of HK$110,000.

To summarise, the CA has ruled that the trial judge was correct to accept defence submissions that the parties had already reached a settlement framework governing the scope of any uninsured loss claim. The plaintiff’s recoverable uninsured loss was limited to the policy excess and any agreed deductions, thus he could not reclassify previously insured or rejected claims in an attempt to enlarge the damages claim.

The judgment is a salutary lesson about the extent to which an insured party may pursue recovery of losses after receiving indemnity from an insurer. Cases involving subrogation can be complex and costly and it is important that all parties – insurers, policyholders and legal practitioners – have clarity. Policyholders in particular should be fully aware of their rights and understand how the subrogation process works. A review of current insurance documents is strongly recommended.

Here at BC&C, we have a burgeoning insurance and personal injury team handling all manner of cases and the highlighted matter is one of many successful outcomes we have achieved for our clients. For all aspects of insurance law, we are ready to assist.

Jeffrey Chan has been a Partner in BC&C since 2015 and leads the firm’s Insurance and Personal Injury team which advises on legal matters and handles court cases for insurance companies and/or their insured parties. He practices all areas of civil litigation with a particular emphasis on personal injuries and property damage claims, employees’ compensation legislation and insurance-related disputes. He can be contacted at jeffrey@boasecohencollins.com.

Gabriel Brettell is an Associate with BC&C. He maintains a mixed practice in both criminal and civil litigation and also has experience in family law, insurance and personal injury, arbitration, company and commercial, employment and immigration matters. He can be contacted at gabriel@boasecohencollins.com.