The recent decision of the High Court in Michael Murphy v Allianz Plc 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.
In Dunne v PJ White Construction Company  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 Finlay CJ held that in such proceedings the onus of proof is not on a plaintiff to prove that the insurer had rescinded or repudiated the contract but rather it is for the insurer to establish that there has been a rescission or repudiation.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 & Orsand 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the main contractor nor its brokers furnished the insurer with the documents sought and, as a result, indemnity was withdrawn under the policy.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 Huand 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.
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.