Insurance Update: High Court Confirms that Ireland Has No Equivalent to “Third Party Rights Against Insurers Act”
06 October 2015
A recent High Court decision confirms that s62 of the Civil Liability Act 1961 applies only in very limited circumstances:
- The “insured” company must have been wound up;
- If Insurers have validly repudiated the claim in respect of the third party’s injury, then the third party has no privity of contract to challenge Insurers;
- The existence and amount of any liability of the insured employer company to the third party must have been established.
There have been a number of attempts by claimants in Ireland to bring a claim against employers’ liability insurers where the claimant’s employer is not in a position to meet the claim. Reliance is placed on section 62 of the Civil Liability Act 1961 which states:
“62.—Where a person (… the insured) who has effected a policy of insurance in respect of liability for a wrong, … if a corporate body, is wound up … moneys payable to the insured under the policy shall be applicable only to discharging in full all valid claims against the insured in respect of which those moneys are payable, and no part of those moneys shall be assets of the insured ….”
The apparent objective of the legislation is to “ring fence” any money payable by insurers relating to a “valid” liability claim against a company in the process of being wound up. This is so that the insurance money is not used as part of the insured company’s assets in the liquidation.
The background to Michael Murphy v Allianz PLC, began in 2004 when Mr Murphy sued Bri-Mo Ltd for damages for personal injury. In May 2006, Allianz confirmed that it was withdrawing any indemnity to Bri-Mo for Mr Murphy’s claim. The basis for the declinature was Bri-Mo’s failure to comply with a condition precedent in its policy with Allianz to provide wage declarations. Bri-Mo never challenged this repudiation. In September 2010, Bri-Mo was struck off the Register of Companies. In November 2011, Mr Murphy obtained judgment in default of defence against Bri-Mo with damages to be assessed.
Mr Murphy then issued proceedings against Allianz in May 2012 seeking, among other things, a declaration that any award made against Bri-Mo in favour of Mr Murphy constituted a payment which Allianz was obliged to pay. Allianz brought a preliminary application to have the proceedings struck out on the basis that they disclosed no reasonable cause of action and were bound to fail.
Mr Justice Gilligan confirmed that the application of section 62 was the central issue in the case. He quoted from Mr Justice Peart’s decision from a recent case on the issue  in which the Court found that the statutory provision did not provide the plaintiff in that case, in similar circumstances, with a remedy against the insurer in question. Mr Justice Gilligan confirmed that: “There is no privity of contract between the defendant and the plaintiff in these proceedings, and the defendant owes no duty at law under contract, statute or tort to the plaintiff such as might give rise to a claim against it in damages.”
The Court held that the particular circumstances of the case warranted the exercise of the “sparingly used jurisdiction of the court to strike out proceedings.”
When this decision, and that in Hu v Duleek Formwork , are read together, it is clear that the Court will strictly apply s62 of the Civil Liability Act 1961. In the Hu case, the Court considered whether a new class of relationship existed which could give rise to a duty of care and concluded that it did not.
Any such claimants are therefore left without recourse against their employer’s insurers in either contract (no privity) or tort (no relationship giving rise to a duty of care). Good news for insurers, not so for injured claimants.
For more information, please contact a member of our Insurance team.