In (1) William McIlroy Swindon Ltd (2) Rannoch Investments Ltd v Quinn Insurance Ltd [2010] EWHC 2488 (TCC), the Court considered preliminary issues in two claims brought against an insurer under the Third Parties (Rights Against Insurers) Act 1930. The Defendant insurer denied liability on the grounds that the insured, a building contractor, was in breach of certain policy conditions. The insured had been found liable to the Claimant following a fire. Neither judgment had been satisfied, and the insured went into voluntary liquidation.  

The insurance policy contained an arbitration clause which provided that any dispute in respect of the Defendant’s liability as regards a claim was to be referred to arbitration within nine months of the dispute arising. If it was not referred to arbitration within that period, then the claim was deemed to have been abandoned. In this case, there had been no reference to arbitration of any dispute within nine months of the insured becoming aware of the repudiation.  

The Defendant applied for summary judgment in one of the claims brought against it. In considering the application, the Court dealt with four principle issues:

  1. If properly construed, did the arbitration clause exclude the right to pursue a claim by litigation? The Court held that the wording of the clause was clear. It prescribed a mandatory mode of dispute resolution, within a specified time limit, failing which a claim in respect of that dispute was no longer recoverable. The clause provided an exclusive remedy.  
  2. If the clause did exclude the right to pursue a claim by litigation and terminated the right to bring a claim in arbitration after nine months, was the clause unusual and onerous? On this issue the Court held that a requirement to solve disputes by arbitration could not be regarded as onerous simply because it was unusual. In addition, was the clause incorporated into the policy given that the Defendant had failed to bring it to the attention of the insured? The Court held that the clause was incorporated into the policy. The insured had the wording in its possession for around two years, and had been told by the Defendant to read it carefully. The insurance was also arranged by brokers, who would have given advice to the insured.  
  3. If the clause was incorporated, and the right to pursue a claim by litigation was excluded, had the time for referring the matter to arbitration expired? The Court held that it had. A dispute within the meaning of the clause arose once the insured had notified the Defendant of a claim under the policy in respect of a potential liability to any third party, and the Defendant had notified the insured that it was refusing indemnity. No such dispute was referred within the specified time, and so it was no longer open to either the insured or the Claimants to pursue a claim under the 1930 Act.  
  4. If time had expired, should an extension of time for referring the dispute to arbitration be granted? The Court was not satisfied that it had jurisdiction in this case to extend time under s.12 Arbitration Act 1996. Even if it had the power, it would not grant the extension: the Defendant was not under any obligation to advise the insured of the existence of the time limit, and had acted within its rights.  

The Defendant’s application for summary judgment was dismissed.