Whether insurer could be joined to proceedings against insolvent insured


Weekly Update 43/13 reported an earlier decision in this group litigation. One of the defendant companies was technically insolvent and so the claimants had sought an order that the company provide information about the nature and extent of its insurance arrangements. The judge had ordered the company to provide a witness statement setting out whether it has adequate insurance to fund its participation in this litigation to the completion of the trial and the conclusion of any appeal.

In this case the insurers of one of the other defendant companies sought to join the insurers of the insolvent company to the proceedings in order to obtain a declaration against it. Their stance was that, sooner or later, the insolvent company’s insurers would be brought into the litigation and it was sensible that that should happen now, as the more insurers who are involved in negotiations the greater the likelihood of an early resolution of these claims.

That argument was rejected by Mrs Justice Thirlwall DBE. CPR r19.2 did not apply because all the matters in dispute in the proceedings could be resolved without the addition of the insolvent company’s insurers. Furthermore, the scope of insurance cover provided to the insolvent company was not “connected to” the group litigation. The insolvent’ company’s liability to the claimants was quite separate from its insurance position.

As the judge put it: “However attractively packaged this application may be it is an attempt by [the other defendant and its insurers] to establish in advance the depths of another insurer’s pockets. If ....correct, CPR 19.2 (2)(b) would entitle a claimant in a personal injury case to join into proceedings a defendant’s insurers, seeking a declaration as to the scope of the insurance available to meet the claim. This would cut across years of jurisprudence to the effect that a claimant must take the defendant as he finds him”. The situation would have been the same had the other defendant’s insurers sought to bring a Part 20 claim against the insolvent company’s insurers (who might then have sought to sever the claim).

COMMENT: Had this application succeeded, it would have effectively bypassed the provisions of the Third Parties (Rights Against Insurers) Act 1930, which provides that an action may be brought against an insurer only after judgment is first obtained against the insolvent insured. However, as previously reported, it is expected that this position will change if and when the Insurance Act is passed next year and the 2010 Third Party (Rights Against Insurers) Act is brought into force later in 2015.