The Court of Appeal Judgment in McIlroy and others v Quinn Insurance provides some assistance for parties seeking to pursue under insurance policies where the original insured is insolvent.
Here, a contractor was undertaking refurbishment works on a property. There was a fire which caused damage to adjoining properties.
The adjoining owners sued the contractor. The contractor notified Quinn, its Public Liability insurer but in February 2009 the claim was refused on the basis that the contractor was in breach of certain policy requirements.
Liability was settled and damages were assessed at a Trial in January 2010.
The contractor then put itself into voluntary liquidation – probably due to the lack of insurance cover.
The adjoining owners pursued Quinn under the Third Parties (Rights Against Insurers) Act 1930 under which a third party may pursue a claim as if it were the insured.
The policy provided that where there was any dispute between the insured and insurer about a claim under the policy or the amount to be paid, that dispute was to be referred to arbitration within 9 months of the dispute arising. If not, the claim would be deemed to have been abandoned.
The TCC held that the date of the dispute was the date on which Quinn had rejected the contractor’s claim, and as no arbitration proceedings had been commenced within the 9 month period, the adjoining owners’ claim was time barred.
On appeal, the Court held that an insurer’s liability does not accrue until its liability to the relevant third party had been established. The contractor’s notification of a potential claim was just that – a potential claim – not a claim itself. A “claim” under the policy was a request for an indemnity on the basis of an established cause of action in respect of a third party claim where liability and quantum have been ascertained.
That did not happen until the Judgment in January 2010 when damages were assessed.
The claim was therefore not time barred nor considered abandoned.
COMMENT: This case highlights the potential difficulties for third parties pursuing insurance claims where they may have insufficient notice of any limitation of liability provisions.
If a claim is anticipated, then details of the relevant insurance policies should be sought as a matter of urgency.
The new 2010 Act (when it comes into force) does provide some assistance in that third parties will be able to make relevant enquiries concerning insurance policy details from the insurer, the insured, and broker.
