UK: (Re)insurance Weekly Update 6 - 2016

Last Updated: 19 February 2016
Article by Nigel Brook

A summary of recent developments in insurance, reinsurance and litigation law.

This week's caselaw:

PM Law v Motorplus Limited & Ors: Whether solicitors entitled to bring a claim against BTE/ATE insurers and intermediary

The defendant, an insurance intermediary, sought to strike out the claim against it. The defendant had arrangements with a firm of solicitors to refer people with potential civil claims to these solicitors in return for a referral payment. The defendant, acting as the agent of various insurers, would arrange and administer BTE and ATE insurance policies which were put in place in order to cover the solicitors' clients for their liability for the solicitors' costs plus any adverse costs and disbursements. Following the late payment of referral fees and premiums, the defendant stopped making referrals. The solicitors subsequently commenced proceedings, seeking to recover (from both the defendant and insurers) sums which it alleged were payable under the insurance policies issued in favour of their clients.

Picken J has now struck out that claim, describing it as "unwinnable", for the following reasons:

  1. The solicitors could not rely on the Contracts (Rights of Third Parties) Act 1999. The policies expressly excluded the operation of that Act but, in any event, they did not provide for the solicitors to enforce their terms and nor did they purport to confer a benefit on the solicitors. The purpose of the policies was to benefit the solicitors' client and not other parties (such as the solicitors, the client's opponent in the litigation, or those to whom disbursements are payable) to whom the client has a relevant liability. It was not sufficient to show that the solicitors would incidentally derive a benefit from the policy.
  2. The solicitors did not have title to sue in their own name as they were not the insured under the policies. This position was also spelt out in the solicitors' client care information pack. Where it was stated that the solicitors "will claim disbursements on your insurance policy", this simply meant that a claim would be presented on the client's behalf. Any action would have to be brought in the name of the client. Furthermore, although a solicitor will often, as a matter of practicality, pay disbursements to third parties, such as experts, on their clients' behalf, this does not mean that the solicitors have any legal liability to do so, and so there is no such liability to be covered under the policies.
  3. There was no implied term in the policies entitling the solicitors to sue in their own name. There was no necessity to imply such a term and the judge's finding on this point was supported by the decision of Cooke J in Greene Wood McLean v Templeton (see Weekly Update 40/10).
  4. It was also hopeless to argue that the defendant was liable under the policies. The defendant was not an insurer, it was just an agent which marketed the policies. Prior caselaw makes it clear that "the fact that an insurance agent administers policies and commonly pays claims does not make it personally and directly liable to make payments under policies".
  5. The decision in Greene Wood (see above) did not assist the solicitors in this case. In Greene Wood, Cooke J had found that solicitors were able to bring a claim against ATE insurers because they had given a guarantee to their clients of "no risk, no cost" (ie that the solicitors themselves would pay if the insurers did not – but the primary liability rested with the insurers). However, no such guarantee had been given in this case. Nor was there any other contractual commitment that the solicitors would pay disbursements. The judge added that Greene Wood was "an exceptional case".

Dubai Financial Group v National Private Air Transport: Court of Appeal considers whether court can order retrospective valid service and default judgment at the same time

CPR r6.15(2) provides that the court can order that steps already taken to bring the claim form to the attention of the defendant by an alternative method amounts to good service. In this case, after attempts to serve via diplomatic channels proved ineffective, the defendant was served at its premises in Saudi Arabia, and a legal adviser signed for the documents. This was not a method prohibited under Saudi law. No response pack was served with the claim form.

When no acknowledgment of service was received, the claimant applied to court and obtained a declaration under CPR r6.15 that the defendant had been validly served. At the same time, the judge ordered that judgment in default be entered. Flaux J subsequently refused to set aside that default judgment and a further appeal was made to the Court of Appeal.

The Court of Appeal has now allowed that appeal. The unanimous ground for allowing the appeal was that the defendant did have an arguable defence, and so default judgment should not have been entered for that reason. However, there was disagreement about whether or not a default judgment could be given at the same time as the order retrospectively validating service.

McCombe LJ and Treacy LJ agreed that the defendant was under no obligation to take any steps until the order validating service had been made. CPR r6.15(4)(c) provides that the order validating service "must" specify the period for filing an acknowledgment of service. CPR r12.3 further provides that default judgment may be obtained only if the relevant time for filing the acknowledgment for service has expired and it was held that the relevant time was the time specified in the order: "Where, as in this case, the court did not specify any such time there can be no relevant time which has expired for the purposes of CPR 12.3(1). If this analysis is correct the requirements of CPR 12.3(1)(b) have not been satisfied and so the court is obliged to set aside the default judgment". The lack of a response pack should also have been taken into account when the judge exercised his discretion.

Longmore LJ disagreed with this view though. He held that, since no sanction was provided for under CPR r6.15(4)(c), the default judgment should not be set aside "as of right" where no time for filing the acknowledgment of service was given. He also disputed that there was an absolute bar to ordering default judgment and retrospective service at the same time. He further found that the absence of a response pack was not a good reason for the court exercising its discretion to set aside the default judgment: the defendant here had clearly known about the claim and was already in contact with his legal advisers about it.

Jockey Club Racecourse v Willmott Dixon: Whether Part 36 offer was a genuine attempt to settle

The claimant beat its Part 36 offer in this case, but the defendant argued that it would be unjust to order the normal costs consequences because the offer was not a "genuine attempt to settle the proceedings". This is a new requirement added to the rules in April 2015, but there is also caselaw pre-dating that rule change in which a Part 36 offer has been held not to be valid because the offeror was not making a real concession.

In this case, the claimant offered to accept 95% of the damages which it was claiming (those damages were alleged to be £400,000 at the time of the offer, although that figure subsequently rose to £5 million). The claim itself was an "all or nothing" type claim. Edwards-Stuart J held that although damages of just 95% was not an "available outcome" from the litigation, that in itself did not prevent the offer being a valid Part 36 offer.

Reference was made to the 2003 Court of Appeal decision of Huck v Robson, in which the Court of Appeal allowed the normal costs consequences where the claimant had also offered to accept 95% of her claim. Although it had not been impossible in that case for the claimant to have achieved 95%, that outcome was not likely to result in practice, yet that did not mean the offer was not a Part 36 offer. Nor did it matter that that case was decided before the change of the Part 36 rules.

The claimant accepted that an offer of 98% might be difficult to defend. However, the judge held that the offer here, although very modest, could not be described as derisory:  95% of even £400,000 was still £20,000.

Although the defendant had not yet been told the claimant's entire case at the time of the offer, the defendant should have taken prompt steps to investigate the claim. Accordingly, indemnity costs were awarded from the earliest date by which the defendant could reasonably have put itself in a position to make an informed assessment of the strength of the claim on liability (ie four months from the date of the offer, on the facts).

COMMENT: As well as following Huck v Robson, this case also confirms that the approach adopted in Uren v Corporate Leisure (see Weekly Update 14/13) is correct ie it is appropriate to look not just at the percentage of the claim but also what that equates to in monetary terms. Only "extreme" offers are likely to fail. It is easy to see why claimants in an "all or nothing" type case are subject to scrutiny, since claimants only have to equal their Part 36 offer in order to obtain the enhanced Part 36 costs consequences (hence a claimant could be tempted to "offer" to accept 100% of its claim in such a case). However, where some concession is being made, it is arguable that, since this exercise is only being conducted because the offeror has achieved a better outcome than its offer, the offer cannot have been unreasonable in the first place.

Bailey & Ors v Glaxosmithkline: Disclosure of funding arrangements and substituting an expert

Foskett J considered various case management issues relating to this class action. One of these was that the claimants wished to have permission to substitute two of their experts. One of the claimants' current experts is approaching 80: the judge said that there was no need for evidence as to his capacity to be given. The judge also noted that whilst the substitution of experts is unusual, it is not unknown: "Obviously, it is important for the court not to sanction pure "expert shopping", but I do not detect that in the present case. For whatever reason, it is now five years since the case was due to be heard and it is not surprising that some changes are effectively being forced on the Claimants' side".

However, the judge cautioned against the new experts simply repeating, parrot-fashion, what was said in earlier reports. He refused to comment on the status of the previous reports, saying that that would be a matter for the trial judge. As to costs, it would be unreasonable for the experts (or their lawyers) to simply charge on an hourly basis where much of the ground had already been covered. Before sanctioning the proposed substitutions, though, the judge asked the proposed experts to indicate how many hours they consider it would take them to prepare their reports.

Another issue which arose was whether the claimants had given sufficient information about their funding and ATE insurance arrangements. The judge referred, with apparent approval, to the earlier decisions of West London Pipeline v Total (see Weekly Update 24/08) and XYZ v Various Companies (see Weekly Update 3/13), in which it was held that the court has no power to order disclosure of a defendant's insurance arrangements. Those two decisions conflicted with an earlier decision (Harcourt v Griffin (see Weekly Update 32/07), not referred to in this case, in which it was held that such disclosure could be compelled. In XYZ, the judge had ordered the defendant to provide a witness statement setting out whether it had adequate insurance in place. In this case, Foskett J was prepared to "take at face value" a statement by the claimant's solicitor, to which a statement of truth had been appended, that there was sufficient funding in place.

Chetwynd v Tunmore: Judge dismisses argument that "but for" test of causation did not apply

The "but for" test of causation asks whether the damage of which the claimant complains would have occurred "but for" the defendant's negligence (ie it excludes any irrelevant causes). The "but for" test has not been applied in various cases involving claims for industrial disease or in respect of clinical negligence.

The claimant in this case claimed that excavation works by the defendants had caused a reduction in water levels. The defendants responded that a number of other causes may have reduced the water levels. The claimants argued that a different approach to the "but for" test was appropriate in this case. Instead, they sought to argue that causation would be established if they could show that the excavation made a material contribution (ie was more than minimal) to the reduction. In other words, they sought to extend the test used for industrial disease/clinical negligence cases to cases outside those fields.

The judge rejected that argument: "In my judgment the approach in the disease and clinical negligence cases of only having to establish a material contribution to the injury cannot properly be extended to a case such as the present, where the factual situation is very different". A common feature of the cases where a material contribution was the appropriate test was that there was "one agent or condition brought about by cumulative or consecutive causes, one of which involved fault on the part of the defendant, which resulted in the disease or injury in question". In such cases the defendant might be liable even though it was impossible to prove exactly how the disease or injury was caused.

Pickard v Roberts: Failure to attend and whether hearing had been a "trial"

CPR r39.3 provides that, if a party fails to attend "the trial" and an order or judgment is made against him/her, that order or judgment can only be set aside if three conditions are met (including whether there was a good reason for the non-attendance). Of issue in this case was whether an order made against a party at a hearing was an order made at a "trial". The judge concluded that "the default position with respect to whether or not what takes place at a hearing can be properly described as a trial within CPR 39.3 depends on the context, depends upon the purpose of the hearing and upon the procedural orders which have been made leading up to the hearing, rather than upon the form of whatever has been used in order to get to that hearing". Trials, as distinct from interim hearings, lead to an order which carries with it finality.

Here, both parties had been through various procedural steps so that the matter could be finally determined at the hearing and hence that hearing had been a trial within the meaning of CPR r39.3. Furthermore, there was no basis for the party's assumption that a mediation would be taking place, and hence no good reason for her non-attendance.

Other news

Alternative Dispute Regulations 2015: Since 1 October 2015, all traders selling to consumers have been required to give consumers details of a certified ADR provider and tell the consumer whether they intend to use that provider (although it is not compulsory to use ADR). All businesses which sell services to consumers fall within these requirements (subject to a few limited exceptions), and so both insurers and insurance intermediaries fall within the scope of the Regulations. The European Commission's online platform – the ODR platform- went live on 15th February 2016. This allows consumers who have bought a service online to submit a complaint via the platform to a trader based in another European country. From 15th February 2015, all online traders must include a link on their website to the ODR platform, whether or not they currently market services to consumers in other member states. Companies which ignore these requirements could be liable to Trading Standards civil enforcement action, which could lead to a court order to comply. Further information can be obtained from the link below:

(Re)insurance Weekly Update 6 - 2016

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Nigel Brook
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