The recent decision of the High Court in Michael Murphy v
Allianz Plc [2014] IEHC 692 has provided further clarification
to the scope of section 62 of the Civil Liability Act 1961 and, in
particular, the necessary conditions which must be satisfied for
its application.
This decision follows a number of similar determinations of the
High Court in recent years and confirms the following important
principles in relation to section 62:
- the insured, who has a policy of liability insurance, must be one who becomes bankrupt or dies (if an individual) or wound up (if a company) or dissolved (if a partnership or other incorporated association);
- liability should be established in the underlying claim against the insured and quantum assessed before the insurer is joined to proceedings or sued; and
- the courts will recognise a valid repudiation by an insurer.
Previous Authorities
In Dunne v PJ White Construction Company [1989] ILRM
803 the Supreme Court considered it to be "an inevitable
consequence" of section 62 that it creates a right of action
in favour of an injured third party. Finlay CJ held that in such
proceedings the onus of proof is not on a plaintiff to prove that
the insurer had rescinded or repudiated the contract but rather it
is for the insurer to establish that there has been a rescission or
repudiation.
The decision of Gilligan J in Michael Murphy v Allianz Plc
follows the recent High Court decisions in McCarron v Modern Timber Homes Limited &
Ors and Hu v Duleek Formwork Limited (in liquidation)
& Aviva. Each of these cases also concerned an
employers' liability claim and an application by the insurer to
strike out proceedings on the basis that they disclosed no
reasonable cause of action and were bound to fail.
Michael Murphy v Allianz Plc
The plaintiff in this case suffered an injury on a building site
during his employment as a brick layer and issued proceedings
against the main contractor and the sub-contractor. The insurer
sought outstanding wage declarations from the main contractor's
broker under the relevant Policy Condition and reserved its rights
under the policy pending resolution of the outstanding wage
declarations and any other issues. Neither the main contractor nor
its brokers furnished the insurer with the documents sought and, as
a result, indemnity was withdrawn under the policy. The main
contractor was subsequently struck off the Register of
Companies.
Gilligan J stated that it is clear from the wording of section 62
of the 1961 Act that the insured company must be one which has been
wound up in order for section 62 to apply. The insured company in
this instance, however, had been struck off the Register of
Companies and had not been wound up and therefore the claim could
not lie within the scope of section 62. On this basis alone, the
judge stated that the plaintiff's claim was one which was
"doomed to failure".
The court went on to consider the position if the insured company
was one which had been wound up and observed that, in that
event, the plaintiff would still need to satisfy the court that he
was entitled to monies payable to the insured company under the
policy. It was held that the claim in this case had been validly
repudiated by the insurer and the solicitors for the plaintiff were
aware of this fact since at least January 2010.
Gilligan J endorsed the previous High Court decisions in
McCarron and Hu and stated that it has long been
established that an insured person's right of indemnity under a
policy of insurance against liability to third parties does not
arise until the existence and amount of the liability to the third
party is first established either by action, arbitration or
agreement. A valid claim cannot be so characterised until liability
has been established against the employer and the quantum of the
claim assessed.
The court held that the plaintiff's claim was unsustainable as
it did not constitute a valid claim against the insured in respect
of which monies are payable under the policy of insurance,
particularly by reason of the fact that the quantum of the
insured's liability had not yet been assessed. Moreover, there
was no privity of contract between the insurer and the plaintiff
such that the defendant would owe a duty at law under contract,
statute or in tort and therefore no claim in damages against the
insurer could arise.
Comment
The decision in Michael Murphy v Allianz Plc is one which is to be welcomed by insurers as it confirms yet again that the Irish courts will require strict compliance where an injured third party seeks to rely on section 62 of the Civil Liability Act 1961.
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.