A recent decision in the High Court has seen an application for pre-action disclosure of an insurance policy dismissed because the defendant was not insolvent.
Peel Port Shareholder Finance Company owned a warehouse that was damaged by a fire caused by Dornoch. They argued that their claim was highly likely to win but that, if it did, it would cause Dornoch to become insolvent.
Peel Port therefore sought ‘pre-action disclosure’, meaning Dornoch would have to disclose applicable insurance cover information to Peel Port before they decided whether to proceed.
The courts rejected this, recognising the Third Parties (Rights against Insurers) Act 2010 which provides similar rights but only when the defendant is actually insolvent. As Dornoch is still currently solvent, Peel Port would have to prove exceptional facts that justify disclosing the insurance policy.
This demonstrates that the vast majority of applications against the insurers of solvent insureds will not be successful unless the court considers the circumstances to be exceptional.