IN DECIDING WHETHER TO PURSUE A LIABILITY CLAIM against an individual or company, a claimant would normally wish to take into account whether that person has insurance cover, and, if so, its extent and terms. This is clearly a commercially sensitive issue, on which the English courts have taken different approaches in two recent cases relating to the disclosure of insurance policies held by the defendant in liability proceedings.
Part 18 of the Civil Procedure Rules (CPR) stipulates that the court may, at any time, order a party to:
- clarify any matter which is in dispute in the proceedings; or
- give additional information in relation to any such matter.
The exchange of information is surely to be encouraged, but, in the case of Harcourt v Griffin and ors [2007] the courts had to decide in what circumstances a claimant should be entitled to obtain details of the defendant’s insurance cover.
HARCOURT v FEF GRIFFIN & ORS
In Harcourt, the claimant suffered serious injuries in an accident at a gymnasium run by the defendants. A consent order was made by the court on liability giving judgment for the claimant against the defendants for damages to be assessed at 75% of the overall claim. The overall claim was between £8m and £10m, which, allowing for contributory negligence, was expected to be reduced to between £6m and £7.5m. Costs were estimated as potentially in excess of £1m with success fees.
The first defendant was the gymnasium itself, an unincorporated association; the second and third defendants were employees of the first defendant. The claimant wished to know what level of insurance cover was available to meet any award. If there was no or limited insurance cover, there would be little point in the claimant engaging in what could be a costly and protracted quantum hearing. However, if there was ample cover, it would be in the claimant’s interests to seek to maximise any potential award.
The claimant therefore submitted a request under CPR Part 18 for further information to establish the nature and extent of the defendants’ insurance cover.
As noted above, CPR Part 18 allows a court to make an order to clarify any matter that is in dispute in the proceedings or give additional information in relation to any such matter. The court considered that although the nature and extent of the defendants’ insurance cover was clearly not a ‘matter in dispute in the proceedings’, the wording should be interpreted liberally. The court considered that the purpose of CPR Part 18 was to ensure that the parties have all the information they need to deal efficiently and justly with the matters in dispute and that the thrust of the CPR itself was to ensure swift, proportionate and economical litigation.
The order was therefore made with the caveat that there ‘must be some real basis for suggesting that the disclosure is necessary, in order to determine whether further litigation will be useful or simply a waste of time and money’.
There was a fear, certainly amongst defendant lawyers, that following Harcourt, requests for disclosure of insurance limits would become part and parcel of every piece of litigation. However, that prospect appears to have been restricted with the decision reported on 11 June 2008 in West London Pipeline & Storage Ltd & ors v Total UK Ltd & ors and TAV Engineering Ltd and Motherwell Control Systems 2003 Ltd [2008].
WEST LONDON PIPELINE & STORAGE LTD & ORS v TOTAL UK LTD & ORS
In this action, Total, the first and second defendants, sought a contribution from the third party, TAV, in respect of any liability that Total may incur to interests damaged by the Buncefield explosion. Total alleged that TAV was the designer, manufacturer or supplier of a switch that failed to operate, whereby an overflow of fuel occurred that led to the explosion. The claims were stated to be in excess of £700m.
Total made an application under CPR Part 18 for information on and disclosure of the insurance arrangements of TAV on the basis that the material was relevant to the issues and/or that it was necessary for efficient case management. The claim for contribution is on the basis of the Civil Liability (Contribution) Act 1978, which states that the amount recoverable from any person shall be:
‘… such as may be found by the court to be just and equitable having regard to the person’s responsibility for the damage in question’.
One of the arguments run by TAV was that the court had no jurisdiction to require disclosure of its insurance position as part of the standard disclosure rules as it was not relevant to any issue in the case. It contended that the insurance position had no bearing on the issue of what was ‘just and equitable’ in the claim for contribution and was not directly pertinent to ‘any matter which is in dispute in the proceedings’ within CPR Part 18.
The court agreed with TAV. Although it considered the option of construing CPR Part 18 more liberally, as was done in Harcourt, the court decided that it could not do so on the basis that the Practice Direction supplementing CPR Part 18 stated that:
‘A Request should be concise and strictly confined to matters which are reasonably necessary and proportionate to enable the first party to prepare his own case or to understand the case he has to answer.’
The court considered that the application would have required a rewriting of both the Rule and the Practice Direction.
COMMENT
We believe that this decision is to be welcomed in order to discourage litigation merely on the basis of finding the deepest pocket for a claim. While the early exchange of information is to be encouraged in order to ensure that parties are on more of an equal footing, that should not extend to matters not in dispute in the actual claim, such as the defendant’s available insurance cover. Attempts by claimants to gain a tactical advantage by requesting such information can therefore once more be resisted.
By Alan Stone, solicitor, Reynolds Porter Chamberlain LLP. E-mail: alan.stone@rpc.co.uk.