UK: Insurance: Disclosure Of Details Of Insurance Cover In Litigation

In a decision in June of this year the High Court ruled that a claimant was entitled to have access to details of the defendants’ insurance cover.

In Harcourt v FEF Griffin , a claimant sought an order from the court to compel the defendant to disclose the nature and extent of its insurance cover. The claimant was concerned that the defendant lacked the financial means to satisfy a substantial award and wanted to know whether there was sufficient (and suitable) insurance cover in place.

The court ruled that the defendant’s insurance details should be disclosed. There was a "real basis for concern" in the mind of the claimant as to whether the defendant had sufficient financial standing to satisfy an award. Disclosure of the insurance details would determine whether further litigation would be useful or simply a waste of time and money.

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In a decision in June of this year the High Court ruled that a claimant was entitled to have access to details of the defendants’ insurance cover.

In Harcourt v FEF Griffin , a claimant sought an order from the court to compel the defendant to disclose the nature and extent of its insurance cover. The claimant was concerned that the defendant lacked the financial means to satisfy a substantial award and wanted to know whether there was sufficient (and suitable) insurance cover in place.

The court ruled that the defendant’s insurance details should be disclosed. There was a "real basis for concern" in the mind of the claimant as to whether the defendant had sufficient financial standing to satisfy an award. Disclosure of the insurance details would determine whether further litigation would be useful or simply a waste of time and money.

A recent case shows the preparedness of the courts to order the disclosure of a party’s insurance details, in circumstances where there is uncertainty as to whether that party will be able to satisfy the full amount of an award.

The claimant sustained severe spinal injuries following a gymnastics accident at a gym of the first defendant, Pegasus Gymnastics Club, which was responsible for the provision of gymnastics coaching. The second and third defendants were coaches based at the gym. The claimant sued the defendants for substantial damages for his injury.

The parties reached agreement on liability, leaving the issue of quantum to be determined in subsequent proceedings. The ultimate award was likely to be very significant; the claimant having identified a similar case where the injured party was awarded £9.5 million. The claimant’s final costs bill was also likely to be very substantial.

Concerned that the defendants lacked the financial means to meet the ultimate award, the claimant’s solicitors issued a Request for Further Information under Part 18 of the Civil Procedure Rules (CPR) to the defendants to establish the nature and extent of the defendants’ insurance cover. The Request sought the overall limit of cover, whether that limit applied to periodical payments arising each year in respect of future liabilities, and whether the policy was costs-inclusive or exclusive.

The judge ruled as follows:

1. CPR Rule 18.1, which, among other things, enables the court to order a party to "clarify any matter which is in dispute in the proceedings", should be interpreted liberally. Its purpose was to ensure that the parties had all the information they needed to deal efficiently and justly with the issue in dispute. While the nature and extent of the insurance cover was not itself disputed, it was open to the claimant to request details of the cover under Part 18.
2. The court may order disclosure of underlying insurance details when there is a "real basis for concern" that a realistic and reasonable award might not be satisfied, and to determine whether further litigation will be useful or a waste of time and money.

In response to an objection that such requests would lead to unfair advantage to claimants and "would rapidly become standard practice", the judge said that he was mindful of the fact that there may be cases where revealing the available limit of cover would bring a tactical advantage to the party seeking the information, and said that in such instances courts should consider whether any prejudice would be suffered. He said it would be "highly regrettable" if the making of such applications became a standard litigation tactic and that such applications should be treated with caution.

It is clear that the outcome of this case was significantly influenced by its particular facts: the potential award in the case was very high, and the defendants’ financial means were limited, which meant that the nature and extent of the defendants’ insurance cover was central to the claimant’s decision as to whether to contest quantum.

Nevertheless, the case demonstrates that a party can now seek an order from the court to access another party’s insurance details, certainly when that other party’s financial standing is questionable. This is a movement away from previously understood law, which was that a party to litigation does not have to disclose details of its insurance (or, for that matter, whether it even has insurance). It is doubtful that the court will grant an order in every case; there must be some "real basis for concern" that an award will not be met, and the court should be mindful of any prejudice to the insuring party.

This case illustrates the readiness of the court to interpret Part 18 of the CPR widely and to give effect to the overall spirit of the CPR to avoid wasteful litigation. The court adopted a purposive interpretation of the wording of the CPR in order to achieve this.

The reader should note that, in addition to Requests under Part 18 of the CPR, a claimant may be able to access certain details of a party’s insurance in the following circumstances:

1. When an insolvent party is liable to a third party, that third party may, provided certain conditions are met, be able to bring a direct action against the party’s insurers under the Third Parties (Rights Against Insurers) Act 1930 and to obtain details of the cover in connection with those proceedings;
2. The applicable Pre-Action Protocol may require a party to identify its insurers at an early stage in the proceedings (for example, the Pre-Action Protocol for Personal Injury Claims); and
3. In cases brought under the Unfair Contract Terms Act 1977, a party’s insurance position might be disclosable if it was discussed during contractual negotiations (see Flamar Interocean Ltd. v Denmac Ltd.).

Further reading: Harcourt v FEF Griffin (Representatives of Pegasus Gymnastics Club) and others [2007] EWHC 1500 (QB) and Flamar Intercean Ltd. V Denmac Ltd. [1990] 1 Lloyd’s Rep 434.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 12/09/2007.