Peel Port v Dornoch concerned an application for pre-action disclosure under CPR 31.16 of a public liability insurance policy issued by the defendant insurers to their insured.
Under CPR r.31.16, the court has the power to order a potential party to proceedings to disclose documents on the application of another potential party to those proceedings, where the following requirements are met:
- The respondent is likely to be a party to subsequent proceedings.
- The applicant is also likely to be a party to those proceedings.
- If proceedings had been started, the respondent’s duty by way of standard disclosure would extend to the documents in respect of which disclosure is sought.
- Pre-action disclosure is desirable in order to dispose fairly of the anticipated proceedings, assist the dispute to be resolved without proceedings, or to save costs.
The claimant’s warehouse was damaged by fire allegedly caused by the insured which had taken out public liability insurance with the defendant insurers. The insurers denied liability on the basis of breach of a condition precedent which they alleged had been endorsed to the policy. The terms of the endorsement in question were set out in correspondence with the claimant, but the policy was not disclosed.
The claimant sought pre-action disclosure of the policy, arguing that the insured had no defence to the £1million claim against it which would likely succeed, and the insured would be unable to pay the claim and would be wound up. The insurers accepted that the CPR r.31.16 criteria at (1) to (3) above had been met, and the arguments centred around whether the test in (4) above had been met and whether the court should exercise its discretion to order pre-action disclosure.
The claimants argued that the test had been met because if disclosure was allowed and the claimant was satisfied that the endorsement was valid, it would not pursue the insured and the insurers, therefore avoiding litigation and the associated costs. The insurers argued that the court should not exercise its discretion as to do so would ignore the provisions of the Third Parties (Rights Against Insurers) Act 2010 which provides claimants with pre-action rights to insurance information (not disclosure) where an insured defendant is insolvent. If the claimants could obtain such information through the CPR, these provisions of the Act would be redundant. Further, the Act only requires the provision of information, and so to order disclosure of documents would be inconsistent with the Act.
The court dismissed the claimant’s application for pre-action disclosure of the insured’s public liability insurance policy on the basis that the circumstances of the case were not sufficiently exceptional to require disclosure of a solvent insured’s insurance policy contrary to established practice. It would be unusual to allow disclosure of an insurance policy to a potential third party claimant on the basis that the solvent insured might become insolvent and might enable the claimant to proceed against the insurers. The judge agreed that both CPR r.31.16 and the 2010 Act are relevant. She noted that the regime set out in the Act was recommended by the Law Commission in circumstances where it was considered to be uncertain whether the court would order pre-action disclosure of a liability policy in relation to anticipated proceedings against the insurers of an insolvent insured. Here, as the insured was not insolvent, the judge considered that the application could only have been made under CPR 31.16, but that established practice meant that the application could not succeed.
This judgment supports the general rule that a court will not order disclosure of a solvent insured’s insurance information or policies unless they are relevant to the issues in dispute between the claimant and the defendant insured. This is the case even where there is a real possibility that the claim against the insured defendant will succeed and enforcement of the claim will lead to the defendant’s insolvency.