UK: Insurance And Reinsurance Weekly Update - 12 March 2013

Last Updated: 18 March 2013
Article by Nigel Brook

Welcome to the ninth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2013.

These updates are aimed at keeping you up to speed and informed of the latest developments in caselaw relevant to your practice.

Wallace v Follett

Whether insurers can compel victim to undergo a medical examination in a catastrophic injury case/the importance of reserves

The respondent suffered catastrophic injuries following a road accident. Although an agreement was reached on the payment of a lump sum and periodical payments, certain issues remained in dispute between the respondent and insurers. The insurers appealed against the judgment of a High Court judge on two issues:

  1. To what extent is it reasonable to allow an insurer to require an injured person to undergo a medical examination (at the insurer's cost)? The insurers in this case wished to use the results of the examination to calculate the reserve which it should set aside to cover the future periodical payments (and not for the more common purpose of purchasing an annuity). The Court of Appeal agreed that the judge had taken too limited an approach in finding that it would not be reasonable or proportionate to require the claimant to submit to a medical examination. The Court of Appeal agreed that: (a) an insurer is obliged (or expected) to maintain a reasonably accurate reserve (the insurer having referred to its obligations pursuant to FSA rules and the Companies Act) ; and (b) the insurer would be at a disadvantage here if it did not have accurate information regarding the respondent's medical condition. It was accepted that it might be possible for the insurers to obtain this information without a medical examination, but the insurer was held to be entitled to require the respondent to undergo an examination. However, a medical examination in order to review the insurer's reserve should not be carried out more than once every seven years.
  2. What consequences should there be if the injured person fails to provide written confirmation from his GP, prior to the commencement of each payment year, that the injured person is still alive? It was a standard term of the policy wording for such a letter to be provided. The term also stated that a failure to provide such confirmation would entitle the insurer to suspend the periodic payments. At first instance, it was held that the insurer would need a court order in order to suspend payment. The Court of Appeal has now held that such a court order would be unnecessary since any oversight could quickly be corrected. The insurer was only required to provide a reminder of the obligation.

Berry Piling Systems v Sheer Projects

Whether recklessness in signing a statement of truth can lead to finding of contempt

The defendant claimed that the claimant's two former directors were in contempt of court because they had submitted false statements in enforcement proceedings (CPR r 32.14 provides that contempt proceedings may be brought, with the court's permission, if a person makes a false statement in a document verified by a statement of truth "without an honest belief in its truth").

Of issue in this case was whether CPR r32.14 covers a statement by a person who was reckless as to whether it was true or not. Akenhead J said that: "if a person has no idea one way or the other whether what he or she is saying is true, he or she does not have an honest belief that it is true". He acknowledged that there is some authority to support the argument that, to be in contempt, a person must know what he is saying is untrue. However, he said that: "on balance, I conclude that it can be contempt of court for a witness to make a statement, supported by a statement of truth recklessly, that is, saying something which it can be proved beyond reasonable doubt that he or she consciously has no idea whether it is right or wrong". He added that mere optimism or even carelessness when making a statement (especially if it involves a value judgment) will not be enough to justify a grant of the discretion.

In Kirk v Walton (see Weekly Update 14/09), the judge laid down five elements which a judge should take into account when deciding whether to exercise the discretion to grant permission for a contempt application: a strong prima facie case against the claimant; not straying into the merits of the underlying case; public interest, proportionality and the overriding objective. Akenhead J accepted that this was the right approach (and that a strong prima facie case is the primary consideration). On the facts of the case, recklessness had not been established. The defendant's expert had failed to demonstrate a strong prima facie case against the two directors. The judge was also critical of that expert's failure to identify in his report what his instructions had been – this was a particularly important factor here since his evidence was being used to "prosecute" a serious charge which might lead to imprisonment or a fine.

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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