A question often asked by clients about to embark upon litigation is whether they can gain access to their opponent's liability insurance information or policy to determine if they are 'good for the money'.
Despite being highly relevant from a commercial perspective, the answer continues to be no. Where the opponent is solvent, and the insurance position is not relevant to the issues in dispute between the parties, the court will not order disclosure of that information either before or after proceedings are issued.
What was the background to the application for disclosure?
In Peel Port Shareholder Finance Co Ltd v Dornoch Ltd, Peel Port was the owner of a warehouse that was damaged by a fire allegedly caused by the activities (flame cutting work) carried out by a company called European Active Projects Ltd (EAP). Peel Port was concerned that although EAP was solvent, it had not articulated any defence to the claim, would not be able to meet any judgment (likely to be over £1 million) obtained against it and would be wound up. The claimant sought details of EAP's public liability insurance policy from its insurers, Dornoch, to determine whether it was worth pursuing its claim. Dornoch denied that the claim was covered by the policy as EAP had breached certain conditions in an endorsement on the policy relating to 'hot working'. Although the terms of the endorsement were set out in correspondence, Dornoch refused to disclose the policy.
Peel Port issued an application for pre-action disclosure under Civil Procedure Rule (CPR) 31.16. CPR Rule 31.16, provides that pre-action disclosure can be ordered between potential parties to subsequent proceedings where the documentation sought is relevant to the issues between those potential parties and disclosure before proceedings have started is desirable in order to -
- dispose fairly of the anticipated proceedings;
- assist the dispute to be resolved without proceedings; or
- save costs.
Peel Port argued that if the policy was disclosed and the claim was not indeed covered, it would not pursue the claim and so would avoid litigation and save costs. It was therefore appropriate to grant disclosure.
Dornoch relied on the provisions of the Third Parties (Rights against Insurers) Act 2010 (the Third Parties Act) which contains a specific regime for the provision of information (but not documentation) pre-action about an insolvent insured's insurance position to a third party seeking to claim directly against an insurer. It argued that such a regime would not have been necessary if disclosure of insurance policies could be obtained using CPR 31.16. The existence of this specific regime was a powerful reason why the court should not order disclosure that does not fall within the Third Parties Act.
What was the High Court's view?
Mrs Justice Jefford agreed with Dornoch and dismissed the application. She held that:
- Considering the provisions of the Third Parties Act, Parliament cannot have envisaged that CPR Rule 31.16 would be used to obtain insurance policies from the insurers of insolvent insureds;
- There has never been an express statutory provision entitling a litigant to obtain the insurance policy of a solvent insured;
- CPR Rule 31.16 does not provide a route for a prospective litigant to obtain the insurance policy of a solvent insured where the policy does not meet the test of disclosure required i.e. it is not relevant to any issue in the underlying case; and
- Attempting to deploy other provisions in the CPR (such as a request for further information under CPR Rule 18) to obtain solvent companies' insurance policies have (on the whole) failed.
Peel Port had argued that it was probable that it would obtain a judgment against EAP; that the judgment would be substantial; that EAP would probably be unable to meet that judgment and therefore might become insolvent; and that as a result Peel Port would have a claim against Dornoch and seek the insurance information under the Third Parties Act at that stage. That being the case, it argued that the court should exercise its discretion to disclose that information now.
Despite those hypotheses, and in light of her above findings, the judge did not consider that such circumstances were sufficiently exceptional as to justify exercising her discretion to disclose the policy contrary to established practice.
Where does that leave claimants?
A litigant must take his solvent defendant as he finds him. Claimants will receive nothing - by way of insurance information - that is not volunteered, unless that information is relevant to the issues in dispute between the claimant and the insured. The fact that the terms of the policy might be highly relevant to any dispute over coverage (and so enforcement of any judgement obtained) between a claimant and the insurer in any claim subsequently brought under the Third Parties Act is irrelevant until a claim is made under that legislation.