Ireland has no legislative equivalent to the UK’s Third Parties (Rights against Insurers) Act 2010 and the recent decision of Yun Bing Hu v Duleek Formwork Ltd (in liquidation) & Aviva Direct Ireland Ltd t/a Aviva IEHC 50 confirms that section 62 of the Civil Liability Act 1961 cannot be interpreted to confer equivalent rights.
Section 62 provides:
"Where a person (… the insured) who has effected a policy of insurance in respect of liability for a wrong, [becomes insolvent], 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 or applicable to the payment of the debts (other than those claims) of the insured ..." (our emphasis added).
This provision was considered in the case of Dunne v PJ White Construction Co Ltd (in liquidation) , an employer’s liability claim. On appeal, the key issue was which party (the insurers or the Claimant) bore the onus of proof as to whether the insurers were entitled to rescind or repudiate the policy.
The issue of whether the Claimant had a right to bring an action against insurers by reason of s.62 was not raised in the pleadings, nor referred to in the High Court. In the Supreme Court, Chief Justice Finlay took the view that, since the issue had not been raised, he must deal with the case on the basis that the Claimant had such a right. There was no debate about the Claimant’s rights against insurers.
The issue has now been clarified in the High Court case of Yun Bing Hu, an employer’s liability claim in which the defendant employer had gone into liquidation. When the Claimant discovered that Aviva had declined cover, he joined them to the proceedings. The Claimant sought a declaration that any damages and costs awarded to the Claimant be paid by Aviva pursuant to the policy of insurance which the defendant employer company had with Aviva.
However, in breach of a condition precedent, the insured defendant company had failed to pay its excess. Aviva, therefore, repudiated the claim and argued that they had no obligation to pay out to the Claimant. The Claimant sought to rely on s.62 but Aviva argued that there were no moneys "payable to the insured", as the claim had been repudiated.
The Judge noted that the case of Dunne was not on point as far as the Claimant’s case was concerned.
He then went on to hold that the Claimant had no privity of contract with Aviva and could not enforce the contract of insurance between the defendant employer and Aviva. The Judge considered the possibility that a claim could be brought against Aviva by the Claimant in tort but held that there was no precedent for finding that a duty of care existed in these circumstances and opined that there was insufficient proximity to make such a finding. Ultimately, the Judge struck out the claim as disclosing no reasonable cause of action against Aviva.
This case helpfully clarifies an issue which has been debated for a number of years and now confirms that, in circumstances where insurers have good grounds to repudiate a claim, claimants cannot pursue insurers with whom they have no contract.