When considering a professional negligence claim, it is crucial to know whether the defendant has indemnity insurance. Without insurance, judgment may not be satisfied. Yet it is not easy to be sure and even if insurance exists it is difficult to know whether the claim has been notified to the insurer. Without notification, insurance may not pay your judgment.
Background
There is no obligation for a defendant to disclose their insurance details in a professional negligence claim. Usually the claimant will have some idea since basic insurance details often form part of the retainer letter originally sent to the claimant. Also, if the letter of claim is passed on to the insurers, in the majority of cases, the insurer’s solicitors come on the record and confirm that cover is in place.
However, there are negligence cases where the defendant’s insurers are not openly involved. Also, at an early stage when you are considering whether to invest in a claim they may not be involved. What can a claimant do in this scenario?
General position – recently reconfirmed in Dowling & Others v Bennett Griffin on appeal October 2014
The claim here was that the claimant solicitors failed to confirm that the defendant architect had insurance to pay the judgment. The architect had failed to notify his insurers and they subsequently avoided the insurance on the grounds of non-disclosure and misrepresentation. The architects went into insolvent liquidation and although the claim succeeded, the full judgment was not satisfied.
The solicitors had written to the defendant on numerous occasions asking for details of their insurance. Some information about insurance was obtained but no clear assurances were received from the defendant. The defendant had taken the (obviously wrong) view that the claim would never succeed and there was no reason to notify a claim and damage his claim history.
The court held that the solicitors were not negligent. Had they made an application for disclosure of insurance documents, they would not have succeeded. The insurance documents were clearly not subject to standard disclosure: they neither supported the case nor adversely affected it. An application for more information would also have failed as insurance documents would not help to clarify any matter in dispute in the proceedings.
Another route to disclosure was suggested at appeal: an implied term in the retainer that the insured would promptly notify its insurers of any claim made against it, which could and should have been enforced by injunction. Yet there was no evidence that would have supported an injunction application. If anything, the solicitors for the defendant were signalling (albeit unreliably) that insurance was in place. Since this route to disclosure was not something that occurred to the legal team making the claim until appeal, it was hardly something that should have been so obvious to the solicitors acting against the architect that to miss it was negligent.
At the point when the solicitors were acting on this case the ‘XYZ’ route to disclosure of insurance information (below) had not been approved. Although the route below may be available in some cases from now on, the fact that the solicitors did not use it then could not mean they were negligent.
XYZ v Various [2013]
A different approach was adopted in XYZ v Various [2013] which involved a group litigation in which nearly 1000 women sought damages for defective implants manufactured by a French company, PIP.
The claimants in this case made an application for an order that the lead defendant provide information on the nature and extent of their liability insurance cover. The claimants relied on CPR Part 18 and CPR Part 3.1 (2) (m) which provides that “except where these rules provide otherwise, the Court may…take any…step or make any…order for the purpose of managing the case and furthering the overriding objective.”
The judge stated that under CPR Part 3.1 (2) (m), the court could make an order for the purpose of managing the case. Although the judge could not order the defendant to inform the claimants as to whether they had sufficient insurance cover to meet any order for damages or costs, the judge concluded that the court could order the defendant to provide information to the court as to whether they had adequate cover to fund their participation in this litigation. This information was deemed necessary to permit the judge to case manage the litigation and it gave no unfair advantage to the claimants.
It is worth noting that this case was a complex group litigation involving a test case and the defendant was technically insolvent. This approach had to be adopted by the court because if the defendant could not continue to fund the litigation, then it would have been necessary to select new sample cases with different claimants and defendants.
Conclusion
It is very difficult to be sure that a defendant has insurance to pay a claim unless insurers themselves are on the record. The court will not order disclosure of insurance documents other than for case management on complex cases, a route that offers limited comfort in a standard professional negligence claim. It may be possible to apply for an injunction to require the defendant to notify insurers but this approach has not been properly tested, there may not be enough evidence available to support that application and it is an expensive application to make at an early stage of a claim.
