In William McIlroy Swindon Ltd & Rannoch Investments Ltd v Quinn Insurance Ltd [2010] EWHC 2448 (TCC), the High Court was asked to consider, as a preliminary issue, when a dispute could be said to have arisen for the purposes of an arbitration clause that provided that any dispute as to the insurer's liability was to be referred to arbitration within nine months, failing which the claim would be deemed to have been abandoned.

Quinn Insurance Ltd (Quinn), provided the insured, Lenihan, with public liability coverage. In September 2006, there was a fire at a property where Lenihan was carrying out refurbishment work. Quinn refused to provide indemnity for potential third party claims arising from the fire, and informed Lenihan of this in late February 2009. William McIlroy Swindon Ltd and Rannoch Investments Ltd (the Claimants) obtained quantified judgments against Lenihan in respect of the fire in January 2010. Lenihan subsequently went into liquidation and the rights of the insured passed onto the Claimants under the Third Parties (Rights Against Insurers) Act 1930. In the present claim, the Claimants argued that the nine month time bar under the arbitration clause had no application, or in the alternative, requested an extension of time to refer the dispute to arbitration.

In relation to the request for an extension of time, Edwards-Stuart J raised issues of jurisdiction. The insurance policy containing the arbitration clause in question was governed by Irish law, consequently the judge felt that while he could express his views on the matter, an English court could not grant an extension of time for commencing arbitration under these circumstances.

As regards the application of the time bar, the Claimants argued that a dispute could not have arisen under the arbitration clause until the Claimants received judgment against Lenihan, because up until that point no legal liability had been established and there was no basis for any dispute to be referred to arbitration. However, the judge rejected this position, stating that the relevant dispute was Quinn's refusal to indemnify Lenihan for potential third party claims in February 2009. This was the dispute that ought to have been referred to arbitration by Lenihan by November 2009 at the latest.

Edwards-Stuart J acknowledged that although the nine month time limit was unusual and inconvenient, it was adequate to assess the merits of a dispute and refer it to arbitration if necessary. Aditionally, Quinn was not obliged to bring the clause to Lenihan's attention – it was sufficient that Quinn had specifically told Lenihan to read the policy carefully. The judge concluded that the fact that the Claimants now found themselves prejudiced by Lenihan's conduct was unfortunate but irrelevant for the purposes of his judgment.

This decision shows that the courts are prepared to uphold clauses requiring arbitration within a certain period of time. This can be a useful tool for insurers to ensure that claims are brought against them in a timely manner, and affords them more certainty when closing their files after they have refused claims.