John Larkin and Owen O'Sullivan summarise some recent Irish High Court decisions that may have an effect on insurers

The insurance industry will have to take note of recent Irish High Court decisions that will affect the way in which it conducts business. The first case considered the scope of an insurer's duty of care to a borrower who had taken out life coverage to secure loan facilities, but whose premium ceased to be paid.

In the second case, the court quashed an insurer's attempt to secure US jurisdiction on a denial of cover claim based on the fact that it had issued separate proceedings in the US.

In the third case a judicial restatement was made about the purpose of the Motor Insurers Bureau of Ireland (MIBI) agreement to provide compensation for road traffic injuries involving uninsured and unidentified drivers.

Insurer's duty of care
In this case, the plaintiff had arranged a mortgage with a third-party bank. The plaintiff and his wife had taken out life assurance policies as part of the credit agreement. At some point, the premium on the wife's policy was not paid and the policy lapsed. The plaintiff's wife died during the term of the mortgage and the insurer refused pay out.

When the lender became aware that a premium payment had not been made, a manager contacted the insurer by telephone and was told that everything was "correct and in order". Relying on this, he took no action. The insurer denied that any such conversation ever took place.

It was held that the insurer had made a mis-statement of fact, but at no stage up to the time the policy lapsed was the plaintiff aware of the telephone conversation.

The court found that the plaintiff was not misled by the insurer's mis-statement because he was not aware of it. Therefore, it in no way influenced his conduct or caused him to act to his detriment. It held that it would not be reasonable that the law should impose a duty of care on the insurer for the benefit of the plaintiff in these circumstances.

Wildgust v Bank of Ireland and Norwich Union, High Court (1993 No. 5275P), Morris J, 17 August 2001.

In this case, plaintiffs allegedly sustained serious financial loss as a result of an incident at their plant and submitted insurance claims. Coverage was denied and one of the insurers, American Guarantee & Liability Insurance Company, brought an application to the High Court seeking to have the proceedings set aside or stayed.

American submitted, among other things, that the claim was not a proper one for service outside the jurisdiction. It also argued that, as it had already issued proceedings in Massachusetts that were well advanced, Massachusetts was the more appropriate forum for the dispute.

The plaintiffs submitted that the principal factors in urging that the proceedings continue in Ireland were as follows:

  • The incident, the subject of the claim,occurred in Ireland.

  • Witnesses of fact and relevant documentation relating to the nature of the process and the losses of the plaintiffs were all located in Ireland;

  • The dispute as to whether indemnity was denied - before any inspection was carried out - related to a meeting that occurred in Ireland.

    The plaintiffs also claimed against American in respect of a breach within the jurisdiction of a contract. The breach that was relied upon was the failure of American to make payments in Ireland under the master policy.

    On these preliminary issues the court held that American had engaged in forum shopping involving the taking of pre-emptive legal proceedings in the US with the intention of ultimately seeking to prevent the insured's claiming an indemnity in the Irish jurisdiction. The court also held that the appropriate forum for resolving the dispute was in Ireland and that American was a necessary or proper party to the proceedings.

    Analog Devices and Others v Zurich Insurance, American Guarantee & Liability Insurance Company, High Court, (2000 No. 727P), Lavan J, 18 May 2001.

    MIBI Agreement
    A driver on the main Limerick to Nenagh road skidded on what later transpired to be oil and was injured. The driver instituted proceedings against the MIBI. Upon investigation by the Garda it was found that there was a patch of oil on the road on which the plaintiff had been driving.

    Part of Clause 6 of the MIBI Agreement states: "... the liability of MIBI shall extend to the payment of compensation for the personal injury or death of any person caused by the negligent driving of a vehicle in a public place, where the owner or user of the vehicle remains unidentified or untraced."

    The court found:

  • The direct cause of this accident was the oil on the roadway.

  • The most likely and probable cause of the oil spillage was a truck or lorry on which the cap or cover of the fuel tank was either missing, defective or not properly fitted.

  • The driver was in the position where he did not know what happened and could not know what happened. There was also no way in which the MIBI could know what happened, and therefore the MIBI was unable to produce any explanation that might excuse liability.

    The judge commented that the whole purpose of the MIBI Agreement and its predecessors is to compensate persons injured in road traffic accidents where no other compensation is available. It would be quite wrong and quite contrary to the intention and purposes of the agreement that a plaintiff should be put in a position that he will not receive compensation if he cannot prove that the driver could have no defence, where he would not have to have this burden of proof if the identity of the driver or vehicle was known.

    Rathwell v Motor Insurers Bureau of Ireland, High Court, (1998 No. 3082P), McCracken J, 6 July 2001.

    John Larkin and Owen O'Sullivan are solicitors at Irish law firm William Fry

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