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Preliminary and jurisdictional considerations in insurance litigation


In what fora are insurance disputes litigated?

In Ireland, the jurisdiction in which court proceedings are brought depends on the monetary value of the claim. The District Court deals with claims up to a value of €15,000 and the Circuit Court up to a value of €75,000 (€60,000 for personal injury cases). Claims with a monetary value in excess of the Circuit Court jurisdiction are heard by the High Court, which has an unlimited monetary jurisdiction.

The High Court has a specialist court, the Commercial Court, which deals exclusively with commercial disputes. Proceedings are case-managed and tend to move at a much quicker pace than general High Court cases; the average time from entry into the list to full hearing varies between one week to six months depending on the time required for hearing. Entry to the list is at the discretion of the judge and may be refused if there has been any delay. Insurance and reinsurance disputes can be heard in the Commercial Court if the value of the claim or counterclaim exceeds €1 million and the court considers that the dispute is inherently commercial in nature.

The Commercial Court judges place a strong emphasis on mediation and the Commercial Court Rules provide for up to a four-week stay of proceedings to allow the parties to consider mediation.

Insurance disputes before the courts in Ireland are heard by a judge sitting alone and not a jury.

If an insurance contract contains an arbitration clause, the dispute must be referred to arbitration. However, there is an exception for consumers, who are not bound by an arbitration clause in an insurance policy if the claim is less than €5,000 and the relevant policy has not been individually negotiated.

The Financial Services and Pensions Ombudsman (FSPO) is a statutory officer who deals independently with unresolved complaints from consumers about their individual dealings with all financial service providers, including insurers. The FSPO has broad powers and may direct insurers to: pay compensation up to a maximum of €250,000; change their practices in the future; and rectify the conduct complained of (for example, requiring the insurer to pay a disputed claim).

Causes of action

When do insurance-related causes of action accrue?

For actions in contract, the cause of action accrues on the date of the breach (and not when the damage is suffered). The general position under Irish law is that claims for breach of contract must be brought (by issue of proceedings) within six years of the date on which the cause of action accrued (section 11(1)(a), Statute of Limitations Act 1957).

Where a complaint is made to the FSPO, the FSPO does not generally have jurisdiction to investigate complaints where the conduct complained of occurred more than six years before the complaint is made. However, if the complaint relates to ‘long-term financial services’, namely products or services where the maturity or term extends beyond five years and one month, or life assurance policies not subject to annual renewal, the six-year rule does not apply. The limitation period for such long-term financial services is: (i) six years from the date of the act or conduct giving rise to the complaint; (ii) three years from the earlier of the date on which the consumer became aware of the said act or conduct or ought to have become aware; or (iii) such longer period as the FSPO may allow where it is just as equitable to extend the period.

Preliminary considerations

What preliminary procedural and strategic considerations should be evaluated in insurance litigation?

The strategic considerations will vary depending on the nature of the dispute, the parties involved and their relationship.

Where an insurer seeks to decline cover of a claim or avoid a policy, the declinature or avoidance letter will be a key proof in any subsequent litigation and should therefore be drafted carefully. Timing is also critical. An insurer should not use the same lawyers to provide coverage advice and to defend the claim under a reservation of rights.

Before commencing any proceedings, the contractual documentation should be reviewed, and in particular jurisdiction and choice of law clauses, to identify the appropriate jurisdiction and forum for the dispute. If the contract contains an arbitration clause, the dispute must be referred to arbitration. The contract may also stipulate an alternative form of dispute resolution such as mediation.

In general, consideration should also be given at the outset to the availability of evidence and witnesses.

It is usual practice in Ireland for a pre-action letter to be sent before proceedings are issued, as there is a potential for costs exposure in not having done so.

It should also be noted that the Mediation Act 2017 requires solicitors to advise their clients of the merits of mediation as an alternative dispute resolution mechanism in advance of issuing court proceedings. In addition, in order to issue proceedings, the Act requires the solicitor to swear a statutory declaration confirming that such advice has been provided and this declaration must be filed with the originating document in the relevant court office.


What remedies or damages may apply?

The remedies available to an insurer depend on the breach.

In case of a breach of the duty of utmost good faith, the remedy is to declare the contract void. Under the Marine Insurance Act 1906, this remedy is available for non-disclosure (section 18) or material misrepresentation (section 20) by the insured. However, avoidance is generally considered to be a draconian remedy and the Irish courts have traditionally been reluctant to uphold avoidance with the result that insurers can be left without an effective remedy. An insurer is not entitled to decline cover of the claim in lieu of avoidance, unless the relevant policy contains an innocent non-disclosure clause to this effect.

The Irish courts are willing to uphold policy avoidance for material non-disclosure where the proposal form is clear and unambiguous and the proposer’s duty to disclose is not qualified by reference to answering the questions in the proposal form to the best of the proposer’s knowledge.

The remedy for breach of warranty (including basis of contract clauses) is repudiation; however, warranties are construed very strictly.

Breach of a condition precedent to cover entitles insurers to decline cover of a claim without a requirement to demonstrate prejudice, whereas breach of a condition that is not stated to be a condition precedent to cover entitles the insurer only to damages.

Normally, damages are an adequate remedy for breach of an insurance policy. However, if damages are deemed neither adequate nor appropriate, the law of equity may intervene and the court may grant the remedy of specific performance.

Unless the contract provides otherwise, the general actions for breach of contract are available to the insured. Accordingly an insured would have an action for damages arising from the failure of the insurer to pay a valid claim.

The Consumer Insurance Contracts Bill 2017, which was published on 20 January 2017, proposes amendments to the law relating to consumer insurance contracts (although the proposed definition of consumer is broad). There is no clear timeline for its implementation. It is based on recommendations made by the Law Reform Commission in its report on Consumer Insurance Contracts in 2015 and largely mirrors the provisions of the draft bill proposed in this report.

The bill provides for the following:

  • the pre-contractual duty of good faith is abolished;
  • avoidance of an insurance policy will no longer be the main remedy. In cases of non-disclosure and misrepresentation, the principal remedy will be damages in proportion to the failure by the insured (however, avoidance is retained for fraudulent breaches on public policy grounds);
  • warranties (including basis of contract clauses) are abolished and replaced with suspensive conditions; and
  • a consumer will be entitled to seek damages where an insurer unreasonably withholds or unreasonably delays in making a payment for a valid claim.

Under what circumstances can extracontractual or punitive damages be awarded?

The Irish courts occasionally award punitive or exemplary damages on public policy grounds. The Irish Supreme Court has confirmed that exemplary damages can be awarded where the damage caused was deliberate and malicious, and calculated to unlawfully cause harm or gain an advantage. The award of damages must be proportionate to the injuries suffered and the wrong done.

Exemplary damages are insurable in Ireland. The Law Reform Commission considered this issue in a report published in 2000 (‘[a]ggravated, exemplary and restitutionary damages’) and considered that public policy considerations in favour of prohibiting insurance for exemplary damages were not sufficiently strong to necessitate legislation in this area. It is therefore a matter for individual insurance companies whether they choose to expressly exclude exemplary damages from cover.

Interpretation of insurance contracts


What rules govern interpretation of insurance policies?

Insurance contracts are subject to the same general principles of interpretation as other contracts. The Irish Supreme Court has confirmed in two judgments, Analog Devices v Zurich Insurance and ors and Emo Oil v Sun Alliance and London Insurance Company, that the principles of construction as set out by Lord Hoffmann in ICS v West Bromwich Building Society should be applied to the interpretation of insurance contracts.

In summary, interpretation is the ascertainment of the meaning that the document would convey to a reasonable person having all the background knowledge that would reasonably have been available to the parties in the situation in which they were at the time of the contract. The background or ‘matrix of fact’ should have been reasonably available to the parties and includes anything that would have affected the way in which the language of the document would have been understood by a reasonable person. The previous negotiations of the parties and their declarations of subjective intent are excluded from the admissible background. The meaning that a document (or any other utterance) would convey to a reasonable person is not the same thing as the meaning of its words. The meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The rule that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would, nevertheless, conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention that they plainly could not have had.

The court will apply an objective approach to determine what would have been the intention of reasonable persons in the position of the parties.

Where a contractual term is ambiguous, the interpretation less favourable to the drafter is adopted using the contra proferentem rule (see question 7).

In circumstances where the policyholder is a consumer, the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (as amended) and the Central Bank of Ireland’s Consumer Protection Code 2012 will apply to the contract.


When is an insurance policy provision ambiguous and how are such ambiguities resolved?

An insurance policy wording is ambiguous if a provision can have more than one meaning or if the policy is silent in relation to a particular situation. In addition to the rules set out in question 6, the contra proferentem rule will be applied where there is ambiguity. This rule provides that, if a term is ambiguous, it is interpreted against the person who drafted it. This is usually the insurer and thus the ambiguity is interpreted in favour of the insured. However, if drafted by the broker, the ambiguous term would be interpreted against the insured. Recent case law in England has cast some doubt on the automatic application of a contra proferentem approach to the construction of exclusions in insurance contracts, but to date these decisions have not been followed in Ireland.

Notice to insurance companies

Provision of notice

What are the mechanics of providing notice?

Notice requirements vary from policy to policy. The policy wording will typically confirm to whom a claim should be notified and the manner in which the notification should be made. Typically, notice must be given in writing within a specified time period after the policyholder becomes aware of a claim or a circumstance likely to lead to a claim.


What are a policyholder’s notice obligations for a claims-made policy?

Claims-made policies generally require claims to be notified during the policy period and as soon as reasonably practicable or within a specified time limit. Claims-made policies may also require or permit circumstances that may give rise to a claim to be notified to insurers. The policy may contain a discovery period that allows claims to be notified within a specified period following the expiry of the policy period.

Where the notice requirements are stated to be a condition precedent to cover, the insurer is entitled to decline cover for a breach without any requirement to establish it has suffered prejudice as a result of the breach. In the absence of a condition precedent to liability, the only remedy available to insurers for breach of a notice condition is damages.


When is notice untimely?

See question 9. If an insurer wants to ensure compliance with a notification requirement, it must make timely notification a condition precedent. Where the notification is of a circumstance and not a claim, the courts have interpreted the knowledge of the policyholder on a subjective rather than objective basis.

What are the consequences of late notice?

The consequences of late notice will often be specified in the policy.

Where the notice requirements are stated to be a condition precedent to cover, the insurer is entitled to decline cover for a breach without any requirement to establish it has suffered prejudice as a result of the breach. In the absence of a condition precedent to liability, the only remedy available to insurers for breach of a notice condition is damages.

In practice, the Irish courts are reluctant to permit insurers to decline claims for technical breaches of notice conditions, particularly where there has been a failure to notify a circumstance. While the test to be applied is objective, the court will consider whether the insured had actual knowledge of the particular circumstance that it is alleged should have been notified to insurers. The knowledge of the insured is subjective.

Insurer’s duty to defend


What is the scope of an insurer’s duty to defend?

This is a matter of contract and Irish law does not impose a duty to defend on the insurer. The policy may impose such a duty or may simply provide that the insurer has a right to associate in the defence of the claim.

Failure to defend

What are the consequences of an insurer’s failure to defend?

This will depend on the extent to which the contract imposes such a duty on the insurer. The insured may have a remedy for damages for breach of contract in the event that the insurer breaches a contractual duty to defend. In the event that an insurer takes on the defence of the claim, it must defend the claim subject to the contract of insurance. The interests of the policyholder and the insurer are not always aligned and this can lead to negotiations between them on how to settle or defend the claim.

Standard commercial general liability policies

Bodily injury

What constitutes bodily injury under a standard CGL policy?

Commercial general liability is not a standard type of cover available in Ireland. Bodily injury is, however, a term that is used in liability policies. The definition used varies from policy to policy but typically refers to physical injury, including illness and death.

Property damage

What constitutes property damage under a standard CGL policy?

See question 14. In public liability policies, property damage is typically defined as loss or destruction of or damage to material property.


What constitutes an occurrence under a standard CGL policy?

See question 14. Liability policies are occurrence-based. Occurrence will be defined in the policy but usually the relevant occurrence is the event that triggers the bodily injury or property damage suffered by the third party.

Product liability policies can be occurrence or claims-made policies.

How is the number of covered occurrences determined?

It is very common for both claims-made and losses-occurring policies to contain aggregation wording that provides that claims or occurrences arising out of a single event, source or cause will be treated as a single claim or occurrence for the purposes of the limit of indemnity and excess. Whether the aggregation clause favours the insurer or insured is highly dependent upon the facts and the specific wording of the aggregation clause.


What event or events trigger insurance coverage?

If the insured suffers loss or damage that is an insured risk under the policy, and the claim is made in compliance with policy terms and conditions, a claim will be triggered.

In the case of insurance policies covering the risk of damage to the insured’s property, this is typically when damage to the property occurs. The trigger is set out in the policy wording in the case of property policies. In the case of a policy that covers the risk of liability to third parties, a claim will be triggered when the third party seeks to be compensated by the insured or the insurer suffers loss as defined in the policy.

How is insurance coverage allocated across multiple insurance policies?

It is often the case that more than one policy responds to the same loss. In such circumstances the parties will need to understand how the responsive policies interact and which policy responds first.

There is a distinction between double insurance and where there are layered policies to cover different levels of cover. Where there are different policy layers, the excess policy is not triggered until the primary policy has been exhausted. Where there is double insurance (ie, two or more policies covering the same risk on behalf of the same insured), the principle of contribution applies.

Section 80(1) of the Marine Insurance Act 1906 provides that each insurer shall contribute rateably to the loss in proportion to the amount for which the insurer is liable under contract.

It is also necessary to consider whether its policies contain rateable contribution clauses, non-contribution clauses or excess clauses.

First-party property insurance


What is the general scope of first-party property coverage?

First-party property coverage is essentially property insurance for loss or damage to an insured’s goods or buildings, or both, following the occurrence of an insured event. The policy can either specify the insured event (earthquake, fire, flood) or be an all-risks policy. All-risks material damage property policies are common in Ireland. There is no standard wording. It is accepted that there is a limit on the range of risks covered and that the policy may expressly exclude or include particular risks.


How is property valued under first-party insurance policies?

The insured cannot recover more than his or her actual loss on the basis of the principle of indemnity (unless the policy provides otherwise).

In the absence of ‘reinstatement as new conditions’, insurers are liable for the value of the property at the time of the loss, destruction or damage. Insurers will generally seek to agree the value based on reinstatement costs less a deduction for betterment, the cost of an equivalent modern replacement or market value.

Natural disasters

Is insurance available in your jurisdiction for natural disasters and, if so, how does it generally operate?

We are not aware of any insurance products in Ireland that are aimed solely at providing cover for loss caused by natural disaster. However, there are insurance products available in Ireland that typically cover damage to property as a result of natural disasters (such as hurricanes, floods, wildfires and earthquakes). For example, home insurance policies in Ireland typically provide cover for damage to buildings and contents caused by fire, explosion, lightning, earthquake, storm or floods.

Directors’ and officers’ insurance


What is the scope of D&O coverage?

Legislation in Ireland prohibits a company from including in its constitutional documents and contracts any provision that indemnifies its directors and officers from liability to the company in respect of negligence, breach of duty, default or breach of trust. There is one exception to this, which provides that a company may indemnify a director or officer from any liability incurred by that director or officer in successfully defending civil or criminal proceedings taken against him or her.

A company is, however, permitted to purchase directors’ and officers’ (D&O) insurance in relation to the negligence, breach of duty, default or breach of trust of a director. D&O policies generally cover damages awarded against the director, legal costs in relation to an action and in certain circumstances, the costs of the director in relation to any official investigation taken by the regulatory authorities in Ireland. However, D&O policies generally exclude cover for fraud and criminal fines imposed.

D&O cover is available in Ireland for side A (loss suffered by director or officer as a result of a claim that has not been indemnified by the company), side B (indemnifications by the company to the director or officer) and side C (actions brought against the company). Side A cover is the most common form. On side A the director is the insured person, whereas for both sides B and C the insured person is the company.


What issues are commonly litigated in the context of D&O policies?

In Ireland, D&O policies commonly respond to restriction and disqualification applications made in the context of insolvency.

From a coverage perspective, insured versus insured claims may be covered depending on the policy wording. There has been an increase in insured versus insured claims in recent years, in particular where, for example, a liquidator has been appointed to the company.

Issues of non-disclosure and late notification can arise in the context of D&O policies.

Cyber insurance


What type of risks may be covered in cyber insurance policies?

Cyber policies frequently cover the cost of responding to a breach as well as providing first-party and third-party cover.

Breach response coverage may include the cost of IT forensic experts to investigate how the breach occurred, whether it is ongoing and to identify system weaknesses, PR to manage the fallout publicly and to prevent or minimise brand damage, as well as legal experts and other costs associated with the notification process.

First-party cover relates to the insured’s loss and covers business interruption costs owing to the breach.

Third-party coverage includes defence costs and damages arising from third-party claims against an insured where, for example, the insured’s negligence enabled the data breach to occur.


What cyber insurance issues have been litigated?

Cyber insurance is still a relatively new product on the Irish market; however, it has become more popular in recent times. We are not aware that any cyber insurance coverage issues have been litigated before the Irish courts as of yet. There have been data breaches and it is highly likely that the cyber policies have responded in these cases.

Terrorism insurance


Is insurance available in your jurisdiction for injury or damage caused by acts of terrorism and, if so, how does it generally operate?

There are insurance products available in Ireland that cover damage to property and loss of income as a result of terrorism. Cover extends to physical damage to commercial buildings and their contents resulting from terrorism and associated business interruption expenses, including profit loss and increased operational costs.

Update and trends

Update and trends

Updates and trends


Following the United Kingdom’s decision to leave the EU and the subsequent triggering of article 50 of the Treaty on European Union, many financial services companies have established or are in the process of establishing a subsidiary in a country with access to the single market to mitigate the potential loss of passporting rights post-transition period (which has been agreed to be December 2020). Ireland’s well-established prudential regulation, common law jurisdiction, and well-educated, English-speaking and flexible workforce, together with its close proximity to the United Kingdom has cemented its status as a thriving hub for the insurance industry. Authorisation-related activity since the Brexit vote has continued to increase, including queries regarding insurance authorisations. It is anticipated that the increase in authorisation-related activity will continue.

Insurance Distribution (Recast) Directive

The European Union (Insurance Distribution) Regulations 2018 transposed the Insurance Distribution (Recast) Directive (IDD) into Irish law on 1 October 2018. The IDD creates a minimum legislative framework for the distribution of insurance and reinsurance products within the EU, and aims to facilitate market integration and enhance consumer protection. Notably, the IDD brings all insurance distributors within the scope of a regulatory framework, which may result in increased regulatory investigations and disputes.

Emerging technologies and risks


Drones are an emerging and rapidly developing technology, and new legislation is proposed in Ireland to increase existing drone regulation and impose criminal liability for certain drone offences. The draft bill (the Small Unmanned Aircraft (Drones) Bill 2017) imposes an obligation on commercial drone operators to have insurance for any liability arising from drone operation, including potential collision with persons or property, and it will be a criminal offence to operate a drone for commercial use without insurance. There is no clear timeline for the implementation of this bill. As the market continues to grow, it seems inevitable that drone insurance will be a growth area.

Driverless cars

Driverless cars and autonomous vehicles present particular challenges for the motor insurance industry. The existing Irish legislative framework is driver-centred and will need to be updated to facilitate driverless cars on Irish roads. The United Kingdom has introduced a single insurer model under the Automated and Electric Vehicles Act 2018, where both driver and driverless technology are insured under one policy. While this has not yet been considered by the Irish legislature in any meaningful way, it can be anticipated that the legislature is likely to follow the approach taken in the United Kingdom, given the similarities between the existing road traffic frameworks in both countries.

Cyber insurance

The market for cyber insurance is growing and is seen as one of the biggest growth areas in the insurance industry globally. According to industry data, the global cyber market was estimated to be worth around US$4.3 billion in premiums in 2017. Fitch believes cyber insurance premiums could increase to US$20 billion by 2020. Cyber insurance is still a relatively new product on the Irish market. However, it has become more popular in recent times and a number of insurers are now offering cyber products in Ireland as a result. Cybersecurity has become a board issue in 2018 in light of the introduction of the GDPR and the Directive on the Security of Network and Information Systems, meaning that companies are more focused on cyber risks and potential insurance requirements. In addition, there has been an increasing number of cyber attacks in Ireland in recent years and the Irish government’s National Risk Assessment 2018 states that this increase is in part owing to the sophistication of tools for carrying out cyber attacks. It is expected that cyber will be a growth area in Ireland in the coming years. In our view, the market leaders over the next five years will be those insurance companies that branch away from the traditional insurance business model towards a more technology-friendly operating model. In today’s digital economy, consumers want instant access to relevant and simplified information and this extends to complex insurance products. Embracing the benefits that technological advances can offer to the design and distribution of innovative insurance products will enable progressive companies to meet the needs and expectations of consumers in a more effective and efficient manner.

Developments related to third-party funding of litigation

In May 2017, the Irish Supreme Court confirmed in Persona Digital Telephony Ltd & Another v Minister for Public Enterprise [2017] IESC 27 that third-party funding of litigation is unlawful, and indicated that any changes to the law in this regard in Ireland would be a matter for the legislature, not the courts. In July 2018, in the case of SPV OSUS Limited v HSBC Institutional Trust Services (Ireland) Limited & Ors, which concerned the legality of an assignment of a cause of action, the Irish Supreme Court called upon the Irish legislature to urgently reform the area and introduce rules surrounding the third-party funding of litigation, failing which the Supreme Court itself may intervene.

The Irish High Court has previously made clear that after-the-event insurance is valid; therefore, post-Persona Digital and SPV OSUS Limited, ATE insurance is the only valid third-party funding in this jurisdiction.

Representative actions in consumer litigation

The European Commission has published a draft Directive that proposes a new type of European-wide collective redress mechanism for consumers. This would allow a ‘qualified entity’ to take a representative action before a member state court, on behalf of a group of consumers who have been affected by a breach of consumer protection laws, to seek redress for the affected group. This would increase litigation risk for industry sectors that are subject to EU regulation, including insurers. The draft Directive will require further consultation in the European Parliament and the European Council and is likely to be amended before publication in the Official Journal. It is anticipated that it will be adopted before the next EU Parliament elections, scheduled for May 2019.