In McIlroy & Rannoch v Quinn  EWHC 2448 (TCC) the Technology and Construction Court held that a clause in an insurance policy which required arbitration to be launched within nine months was effective to bar a third party’s claim.
The claim arose under the Third Parties (Rights against Insurers) Act 1930 and related to a fire in premises. The contractor was sued by the building owners. They secured judgment against him and damages had been assessed. He then promptly went into voluntary liquidation and the judgment was not satisfied.
The building owners became aware that the contractor had the benefit of liability insurance and sued the insurer under the 1930 Act. The difficulty for the third party was that the insurance policy contained a clause whereby any dispute in respect of the insurer’s liability was to be referred to arbitration within nine months of the dispute between the insurer and the insured arising or the claim was deemed to be abandoned. This period had now passed. The question was, when did the dispute arise between the insured and the insurer?
The court held that this event occurred when the insurer made it clear that it was refusing to indemnify. It was irrelevant that the potential claims by the third party against the insured had not yet been resolved.
The effect of this case is to make it clear that time can start running between the insured and the insurer well before liability between the third party and the insured is established. The message would seem to be to get as much information as possible, as soon as possible, and watch out for policy provisions which affect the validity of a claim directly against the insurer.