A summary of recent developments in insurance, reinsurance and litigation law
This week's case law
Cameron v Hussain: Court of Appeal decides whether claim can be brought against motor insurer when identity of driver is unknown
http://www.bailii.org/ew/cases/EWCA/Civ/2017/366.html
The claimant's car was hit by a car insured by the defendant insurers and driven by an unidentified driver. The registered keeper of the car was not insured to drive it. The insured named on the policy has since turned out to be either non-existent or not traceable. The main issue in this case was whether the claimant could amend her claim form to identify a defendant only by description (ie "the person unknown" driving the insured car) (at first instance, the judge refused to allow this).
Although the insurers would have been entitled to avoid the policy for fraudulent misrepresentation, they had not done so within the relevant time period set out in the 1988 Act and so were bound by its terms (and the judge accepted that, as a matter of practice, insurers seek a declaration to avoid only in high value cases). The claimant did not pursue an action against the owner of the vehicle for allowing the driver to drive the vehicle, since the Court of Appeal held in Sahin v Havard (see Weekly Update 43/16) that the insurers would not be liable to cover that liability.
The Court of Appeal held (by a 2:1 majority) that the claim form could and should be amended here to allow judgment to be obtained against an unnamed driver, which the insurers would be required to satisfy pursuant to section 151 of the Road Traffic Act 1988. It was held that the policy of the 1988 Act was that the insurer's liability in relation to a policy written in respect of a specific vehicle and a specific named insured should not depend on whether, as at the date of the proceedings, or thereafter, the claimant can identify the tortfeasor by name. Furthermore, in appropriate cases, a judgment for damages against an unnamed party can be obtained: "there is no reason in principle why, in appropriate cases, it should not be permissible under the CPR for a claimant to bring proceedings against an unnamed defendant, suitably identified by an appropriate description. The fact that the CPR may make express provision for situations in which this can take place does not preclude orders being made against unnamed defendants in other circumstances".
Persimmon Homes v Ove Arup: Court of Appeal rules on the construction of exemption clauses
http://www.bailii.org/ew/cases/EWCA/Civ/2017/373.html
Developers sought to claim against their engineers following the discovery of asbestos on the site. The parties had entered into two agreements, under which the engineers agreed to take out professional indemnity insurance and to limit their overall liability. The agreements also contained an exemption clause which provided that "liability for any claim in relation to asbestos is excluded".
The developers sought to argue that the exemption clause should be read as reading "Liability for causing any claim in relation to asbestos is excluded" (emphasis added). The Court of Appeal held that that argument was wrong, because of the language used and also because of the application of business common sense.
The Court of Appeal then went on to consider the construction of exemption clauses generally and focused on a passage in the Privy Council decision of Canada Steamship v The King [1952], in which it was said that if there is no express reference to negligence in the clause, the court must consider if the words used are wide enough to cover negligence (and, if so, whether the head of damage may be based on some ground other than that of negligence). The Court of Appeal held that that passage is now more relevant to indemnity clauses rather than exemption clauses: "In major construction contracts the parties commonly agree how they will allocate the risks between themselves and who will insure against what. Exemption clauses are part of the contractual apparatus for distributing risk. There is no need to approach such clauses with horror or with a mindset determined to cut them down. Contractors and consultants who accept large risks will charge for doing so and will no doubt take out appropriate insurance. Contractors and consultants who accept lesser degrees of risk will presumably reflect that in the fees which they agree". Accordingly, the canons of construction set out in Canada Steamship were of very little assistance here.
The Court of Appeal also held that the contra proferentem rule has a very limited role now where the contract is a commercial contract, negotiated between parties of equal bargaining power.
RBS Rights Issue Litigation: Court orders security for costs against litigation funders
http://www.bailii.org/ew/cases/EWHC/Ch/2017/1217.html
Weekly Update 10/17 reported the earlier decision in this case that information about the claimants' two commercial funders should be ordered in advance of a threatened application for security for costs against them. That information now having been supplied, the defendants sought security for costs against the funders. There was no dispute that the court could make such an order, even though the funders are not parties to the proceedings, because of section 51 of the Senior Courts Act 1981 and CPR r24.14(2)(b). However, various factors should be taken into account when deciding whether the order should be made. These were listed by the judge as follows:
(1) Whether it is sufficiently clear that the non-party is to be treated as having in effect become in all but name a real party motivated to participate by its commercial interest in the litigation. "Pure funders" ie those acting altruistically to enable access to justice, will be treated differently;
(2) Whether there is a real risk of non-payment such that security against the contingent liability should be granted. The court may draw inferences from "deliberate reticence". That was the case here for one of the funders (Hunnewell BVI);
(3) Whether there is a sufficient link between the funding and the costs for which recovery is sought to make it just for an order to be made. Strict causation is not required;
(4) Whether a risk of liability for costs has sufficiently been brought home to the non- party, either by express warning, or by reference to what a person in its position should be taken to appreciate as to the inherent risks. The judge said that this is unlikely to be a significant factor for commercial litigation funders who are assumed to know their business and its inherent risks; and
(5) Whether there are factors, including for example, delay in the making of an application for security, such as to tip the overall balance against making an order. There are no hard and fast rules, though, and an application may be made at any stage of the proceedings. Here, there had been "extreme" delay, but the judge found that that was explainable on the facts and not fatal to the application for security.
On the facts of the case, it was held to be particularly relevant that there was a lack of, or shortfall, in ATE cover: "As a commercial litigation funder, Hunnewell BVI (and its parent) should have been fully aware of the position in relation to ATE cover; if there was uncertainty it was their business to get to the bottom of it, or incur the risks if they chose not to do so". Accordingly, Hunnewell BVI was ordered to provide security for costs.
However, no security was ordered against the other funder because litigation funding was not its line of business. That was not necessarily a decisive factor "But the fact that it is not part of the usual business of the particular funder does bear on the question of whether that funder should be taken to be funding for commercial gain and accordingly, in the way of things, to have assumed the risks ordinarily inherent in that line of business". In short, this funder had not supported the litigation as a business opportunity.
The judge also held that "Though not common-place or inevitable, I do not think it should be considered particularly exceptional for the court to require a cross-undertaking as the price of an order for security for costs to be provided by a non-party funder before the incidence of costs has been determined".
Ndole Assets v Designer M&E: Court rules that service of claim form by claims consultant is valid service
http://www.bailii.org/ew/cases/EWHC/TCC/2017/1148.html
The claim form in this case had been served by a claims consultant, who was acting for the claimant, a litigant in person. The defendant argued that the claim form had not been properly served because the claims consultant, an unregistered barrister, was not permitted to carry out reserved legal activities under the Legal Services Act 2007. Under the Act, a "reserved legal activity" means the conduct of litigation, which includes the "prosecution" of proceedings.
Coulson J accepted that the prosecution of proceedings would encompass the service of the claim form. However, he went on to find that the claim form had been validly served.
The judge noted that claim forms are regularly served by process servers, but this does not give rise to the issue of reserved legal activities because the process servers are engaged by solicitors to carry out this particular task. In this case, though, no solicitors were acting and the claimant was a litigant in person. However, the litigant in person is permitted to serve the claim form, as he is the claimant in this case and he is also entitled to delegate that task to an agent: "It would be nonsensical to conclude that, whilst a solicitor can delegate the carrying out of this task to a third party, a litigant in person cannot do so".
Emmott v Michael Wilson: Court of Appeal rules that money paid into court in separate litigation could not be used to satisfy judgment debt
http://www.bailii.org/ew/cases/EWCA/Civ/2017/367.html
The defendant had paid money into court in separate litigation in which it was involved. When the claim against it in that litigation was dismissed, an order was made for the sums to be repaid. However, the funds were then made the subject of a freezing order. When the claimant in this case obtained judgment against the defendant, it sought an order under CPR r72.10 for the funds to be paid to him in part satisfaction of his judgment.
At first instance, the judge held that, whatever their prior status, once sums had been paid into court, they were available to a judgment creditor. However, the Court of Appeal held that the judge had erred on this point, finding that: "Money in court is not some special fund which renders it immune from all other claims; and the Court is not bound to make an order in favour of the judgment creditor". Here, once an order was made for the sums to be repaid, the money had become the defendant's money.
(Re)insurance Weekly Update 19 - 2017
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
