UK: Insurance And Reinsurance - Weekly Update - 11 December 2012

Last Updated: 19 December 2012
Article by Nigel Brook

Mueller Europe v Central Roofing

Skeleton arguments and electronic disclosure order/access to document in possession of a party's insurers

Various issues were considered by Coulson J in this case:

(1) Time to lodge skeleton arguments and counsel's notes in the TCC. The TCC Guide provides that skeleton arguments and notes must be lodged by counsel by 1pm the day before the hearing (for most post-CMC applications) and by 4pm one clear day before the hearing of an application which is going to last more than half a day or for a Pre-Trial Review ("PTR"). Those deadlines were not met in this case and he said that "the continued failure to meet these deadlines will, in the future, be met with a tougher response than hitherto, and is more likely to lead to adjourned hearings and wasted costs orders"

(2) Parties should not "overload" the PTR - here, seven separate interlocutory disputes were raised by the parties and so the parties ought to have addressed these issues much earlier than the PTR

(3) Experts' joint statement. Here, one expert failed to engage in the process of meeting with the other side's expert and producing a joint statement (pursuant to CPR r35.12(3)). Coulson J said that "It is becoming too common for experts who are ordered to meet and produce a joint statement first, either to pay lip-service to that arrangement and to produce a joint statement which is of no help at all (as here), or to ignore the requirement for a joint statement and push on with their own reports regardless ...Self-evidently, that is not the right approach". As a result, a limited form of "unless" order was justified here

(4) Electronic disclosure. Although the defendant had tried to comply with an order to carry out a search for electronic documents, it was clear that he did not have the expertise to do so. Coulson J held that he had jurisdiction to order the search to be carried out by a suitably qualified IT consultant: "As a matter of principle, I conclude that, if an order to search for electronic documents can only be complied with if it is undertaken by somebody with expertise in that field, then the court has the jurisdiction to order that the search should be carried out by such a person; otherwise, the court will be making an order with which the party against whom it is made will never be able to comply"

(5) Assessor's notes. The defendant's insurers had instructed an assessor to investigate and his report was disclosed. The claimant sought disclosure of the assessor's notes (on which the report was based). Coulson J held that, pursuant to CPR r31.8, it did not matter that the notes were in the possession of the defendant's insurers and not the defendant itself. What matters is that the document is "in the control" of the defendant and "Documents in the possession of the defendant's insurers are within their control; they could call for their inspection at any time". An order for specific disclosure was therefore made and insurers were ordered to make a proper search for the notes. Any question of privilege could only be asserted once the document had been found and listed

COMMENT: Regarding the last point above, it is not clear why documents in an insurer's possession should be said to be within the "control" on an insured. An insurer would not normally be viewed as the servant or agent of the insured and an insured would not have an enforceable legal right of access to such documents. This is therefore a surprising decision and there does not appear to be any prior caselaw to support it.

Light On Line & Anor v Zumtobel Lighting

Whether ATE premium was recoverable

From next April, the premium for an After the Event insurance policy will cease to be recoverable from the losing party where the policy is entered into after 1 April 2013. However, this case involved an ATE insurance policy taken out before that date and the issue was whether the premium was recoverable or whether the claimants had breached the requirement in the rules to "provide information about the insurance policy". The claimants had initially failed to supply any information and some months later served a copy of the insurance certificate, with the figures for the premium payable at different stages redacted, leaving just the total amount of premium payable.

On appeal, Slade J held that there was a distinction between: (a) the mandatory requirement to show the amount of the premium paid or payable; and (b) evidence (which may include amounts payable if the proceedings are concluded at earlier stages) which allows a paying party to assess the reasonableness of the premium being claimed. If necessary, the defendant could have made an application for disclosure of the unredacted certificate of insurance. The judge concluded that the insurance certificate had complied with the CPR. Although the certificate had also been served late, the judge granted relief from sanctions, taking into account the prejudice suffered by the defendant and the prejudice which the claimants would have suffered if no relief had been granted.

Virgin Atlantic v Zodiac

Whether court should be told about Part 36 offer covering two actions

This case was unusual in that the claimant made a Part 36 offer covering both this case (in which judgment has now been given) and another case involving the same parties. The issue was whether the court should be shown that offer now or whether costs should only be dealt with following the outcome of the other proceedings. CPR r36.13(2) provides that a judge must not be told that a Part 36 offer has been made "until the case has been decided". Although there has been recent caselaw regarding Part 36 offers and split trials (see, for example, Ted Baker v AXA (Weekly Update 24/12)), the issue of a Part 36 offer covering two cases does not appear to have come before the courts before. In particular, it is unclear whether the "case" should be given a wide interpretation where there are related actions or disputes involving the parties. However, Floyd J held that he did not have to decide that issue here because both parties had agreed that he could be told about the existence of the offer.

He went on to say that "what remains to prevent the court being told about the offer is that it is still to be treated as "without prejudice save as to costs" by virtue of CPR r36.13(1)". He held that "the true meaning of the "without prejudice save as to costs" designation is that the contents of the offer should not be referred to until the offeror consents to it being referred to on the question of costs". It does not automatically cease to attract privilege as soon as any question of costs is reached. However, because the claimant had referred to one of the terms of the offer (namely, that it extended to another action as well), it cannot pick and choose the terms which it brings to the court's attention. In other words, the claimant had waived privilege. Accordingly, the court could deal with the issue of costs now.

Courts have a discretion to award interest on costs. In this case, a claim was made for 13% because the party claiming that amount financed its business through loans with heavy rates of interest. The judge said that this did not entitle that party to a higher than normal rate of interest and he awarded 1% over the clearing bank base rate up to the date of judgment.

Harries v Stevenson

Whether claimant entitled to a different discount rate - of possible interest to professional negligence/personal injury insurers

A personal injury claimant can be compensated by either a lump sum or a Periodical Payment Order ("PPO"). Where a lump sum is awarded, a discount rate is applied to prevent the claimant from being over-compensated for the accelerated payment of future losses. That discount rate was set at 2.5% by the Lord Chancellor in 2001 and has remained at that level ever since (although it is currently under review). Section 1(2) of the Damages Act 1996 allows the court to apply a different discount rate if that is "more appropriate" in a particular case. In this case, the claimant argued that a lower discount rate should be applied because the defendant (or his insurers) were unable or unwilling to provide a reasonably secure PPO. Having reviewed the relevant caselaw, Morgan J rejected the claimant's argument.

He held that the court must still find special features to justify a different discount rate - the fact that a court can now make a PPO even without the consent of one or both parties was not sufficient to change the court's approach. A change in "economic forces" was also not sufficient: "it is not appropriate for a court in an individual case to consider whether to adopt a different rate, just because it is said that economic forces today differ from those in 2001. If that is thought to be unfair to claimants, the justification is that it is desirable as a matter of policy for the amount of the discount rate to be prescribed and fixed".

Cleightonhills v Bembridge Marine Ltd

Duty of contractors where sub-contractor hired/duty to warn - of possible interest to professional indemnity insurers

Two issues considered by Akenhead J in this case were as follows:

(1) It was argued that the case of Clay v AJ Crump [1963] is authority for the position that it is no defence to a charge of negligence that a party has relied on others. Akenhead J said that that was "putting the matter far too high". A professional's duty of care can be discharged (at least to a significant extent) by retaining apparently competent parties to carry out some of his/her contractual duties. There may be a duty to supervise any sub-contractors but the extent of that duty will differ depending on the case. The extent and scope of the duty to check may be very limited where eg qualified architects or engineers are retained

(2) There was also debate about the duty to warn. Prior caselaw has considered the duty where there has been actual knowledge of a danger. Akenhead J said that there may be circumstances which would justify no warning being given even where there is actual knowledge. He added that it is "at least possible" that someone charged (contractually) with an obligation to check if works are safe may have a tortious duty of care to warn about dangers "of which he or she should have been aware"

Almeida v Fidelidade- Mundial SA

ECJ judgement on compulsory motor insurance and national laws limiting compensation

The claimant was a passenger in an insured car which was involved in a collision with another car (which was not insured). The local (Portuguese) court held that the claimant was not entitled to damages because it found that he was injured because he had failed to wear a seatbelt (in breach of Portuguese law). The claimant appealed to the Court of Justice of the EU (Grand Chamber) and it has now confirmed that national laws can limit or exclude the liability of insured persons where a car accident gives rise to a personal injury which is not the fault of either driver. This conclusion was not a breach of the relevant Motor Directives which require compensation by means of compulsory insurance against the civil liability of a driver. The obligation to take out insurance covering liability for damage caused to third parties (which is guaranteed by EU legislation) is separate from the extent of the compensation afforded to the third parties on the basis of the civil liability of the insured person (which is governed by national law).

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.

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Nigel Brook
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