I previously considered this subject in a blog in November 2014, which can be found here. I had been faced with the problem of an insolvent company in the context of an injury claim arising out of an occupier’s liability accident in Cornwall. Whilst staying in a hotel my client had suffered a nasty injury to her ankle, The hotel was run by a limited company which went into liquidation during the case.
Litigation is full of uncertainty. Even the strongest case carries risks and a primary consideration when embarking on any litigation is whether the proposed defendant is able to pay.
If your business is being pressed to disclose details of your insurance coverage prior to a claim being brought against it are you obliged to do so?
The recent case of Peel Port Shareholder Finance Company Ltd. v Dornoch Ltd gave the High Court the opportunity to consider whether a public liability insurance policy is something that should be disclosed pre litigation.
This case clarifies that the Third Parties (Rights Against Insurers) Act 2010 (the 2010 Act) does not apply retrospectively, such that the Third Parties (Rights Against Insurers) Act 1930 (the 1930 Act), and only the 1930 Act, will continue to apply in circumstances in which both (i) the insured's insolvency occurred; and (ii) the insured's liability was incurred, prior to 1 August 2016.
We recently reported on the first judgment handed down in relation to the Third Parties (Rights against Insurers) Act 2010 (the TP Act 2010). Hot on the heels of that decision another judgment has been delivered, this one providing guidance on the transitional provisions of the Act.
Redman v Zurich (REV 1) [2017] EWHC 1919
The Third Parties (Rights Against Insurers) Act 2010 (“the 2010 Act”), which covers cases in which there is an insolvent insured, was enacted as a response to criticisms levelled at its predecessor, the 1930 Act of the same name. The timely judgment in Redman v Zurich (Rev 1) [2017] EWHC 1919, clarified the circumstances in which each of these Acts will apply to a claim.
The 2010 Act
In the case of Newwatch Ltd v Bennett, the court ruled that After The Event insurance (ATE) policies could not be used as adequate security for costs by the claimant companies who were based in Denmark and Jersey.
Less than a year after it came into effect on 1 August 2016, the first judgment in relation to the Third Parties (Rights against Insurers) Act 2010 (the TP Act 2010) has been handed down in the case of BAE Systems Pension Fund (Trustees) Limited (the Pension Fund) v Bowmer and Kirkland Limited and others (B&K).
The Technology and Construction Court in England has refused pre-action disclosure of the insurance policy of a currently solvent insured, notwithstanding that a successful claim would have resulted in the insolvency of the insured.
Factual background
In a judgment handed down on 17 March 2017 (but which has only recently become publicly available) in Catalyst Managerial Services v Libya Africa Investment Portfolio,1 Mr Justice Teare held that an After The Event (ATE) insurance policy put before the court in purported satisfaction of a security for costs order, was not in a reasonably satisfactory form.
In Peel Port Shareholder Finance Co Ltd v Dornoch Ltd [2017] EWHC 876 (TCC), Peel Port Shareholder Finance Co Ltd (Peel Port) applied for pre-action disclosure of the defendant's insurance policy under Civil Procedure Rule 31.16. Peel Port was not able to rely on the provisions in Third Party (Rights against Insurers) Act 2010 because the defendant was not insolvent. Peel Port argued that it was highly probable that rights against insurers would be transferred to them under the 2010 Act in due course.