Carna Foods Ltd v Eagle Star Insurance Company (Ireland) Ltd

JurisdictionIreland
JudgeLynch J.
Judgment Date28 May 1997
Neutral Citation1998 WJSC-SC 4384
CourtSupreme Court
Docket Number[S.C. No. 217 and 226 of 1995]
Date28 May 1997
CARNA FOODS LTD v. EAGLE STAR INSURANCE CO LTD

BETWEEN:

CARNA FOODS LIMITED AND EDMUND MALLON
Plaintiffs/Appellants

and

EAGLE STAR INSURANCE CO. (IRELAND) LIMITED
Defendant/Respondent

1998 WJSC-SC 4384

Hamilton C.J.,

Keane J.

Lynch J.

217-95
226-95

THE SUPREME COURT

Synopsis:

Insurance

Appeal; whether implied term in insurance policies to give reasons for cancellation or declinature of renewal of policies; whether intention of parties to imply term; of ficious bystander test; whether breach of Competition Act, 1991, sections 4 & 5. Held: Appeal dismissed; basic principles of law preclude the implication of such a term in insurance policies (Supreme Court: Hamilton CJ., Keane J., Lynch J. 28/05/1997) [1997] 2 IR 193- [1997] 2 ILRM 481

Carna Foods Ltd & Anor. v. Eagle Star Insurance Co. (Ireland) Ltd.

Citations:

COMPETITION ACT 1991 S4

GLOVER V BLN 1973 IR 388

SUN FIRE OFFICE V HART 1889 14 AC 98

MOORCOCK, THE 1889 14 PD 64

LIVERPOOL CITY COUNCIL V IRWIN 1977 AC 239

SINEY V DUBLIN CORPORATION 1980 IR 401

RAJAH V ROYAL COLLEGE OF SURGEONS OF IRELAND 1994 ILRM 233

MURPHY V HIBERNIAN INSURANCE CO UNREP KEANE 13.12.93

CARNA FOODS LTD & MALLON V EAGLE STAR INSURANCE CO (IRL) LTD 1995 1 IR 526

SHIRLAW V SOUTHERN FOUNDRIES (1926) LTD 1939 2 KB 206

TROLLOPE & COLLS LTD V NORTH WEST METROPOLITAN REGIONAL HOSPITAL BOARD 1973 2 AER 260

COMPETITION ACT 1991 S4(1)

COMPETITION ACT 1991 S5(1)

COMPETITION ACT 1991 S5(2)

COMPETITION ACT 1991 S4(1)(a)

COMPETITION ACT 1991 S4(1)(b)

COMPETITION ACT 1991 S4(1)(d)

COMPETITION ACT 1991 S4(1)(e)

1

Judgment of Lynch J. delivered the 28th day of May, 1997.[NEM DISS]

2

This is an appeal by both Plaintiffs against the dismissal by the High Court (McCracken J.) on the 9th June 1995 of their claim for a declaration and consequential orders that the Defendants are bound to give to the Plaintiffs reasons why the Defendants by letters dated the 24th August 1993 cancelled two policies of insurance and declined to renew three other policies of insurance which at that time were operative to indemnify the Plaintiffs against certain risks.

THE FACTS
3

1. By a policy of insurance number 72242479/5 the Defendants provided indemnity to the first Plaintiffs against certain risks in respect of the first Plaintiffs abattoir and meat factory premises and the business carried on therein situate at Main Street, Castleblayney in the County of Monaghan. This policy first came into operation on the 9th September 1988.

4

2. By another policy of insurance number 60210003 the Defendants provided employers liability indemnity to the first Plaintiff in respect of the first Plaintiffs business carried on in the premises at Main Street, Castleblayney aforesaid. This policy replaced similar provisions included inter alia in the policy described at number 1 above and this policy first became operative on the 9th September 1992.

5

3. By a third policy of insurance number 72242480 the Defendants provided indemnity to the second Plaintiff in respect of the second Plaintiffs public house premises and the business carried on therein situate at Main Street, Castleblayney in the County of Monaghan. This policy first became operative on the 9th September 1988.

6

4. By a fourth policy of insurance number 72245540 the Defendants provided indemnity to the second Plaintiff in respect of the second Plaintiffs shop and retail units and the business carried on therein situate at Monaghan Road, Castleblayney in the County of Monaghan. This policy first became operative on the 2nd April 1992.

7

5. By a fifth policy of insurance number 72245542 the Defendants provided indemnity to the second Plaintiff in respect of the second Plaintiffs premises and the business carried on therein situate at number 87 Clanbrassil Street, Dundalk in the County of Louth. This policy first became operative on the 27th April 1992.

8

The second Plaintiff is the Managing Director of the first Plaintiff and is also the major share holder in the first Plaintiff and at all material times had absolute control of the business and affairs of the first Plaintiff.

9

Between the dates when the said policies first became operative and the month of August 1993 the Plaintiffs made claims on foot of the said policies of insurance in respect of which the Defendants ultimately paid sums totalling in or about £1,000,000. On the 24th August 1993 the Defendants wrote in respect of the first three policies described above separate letters in identical terms to the insured named in each policy as follows:

"I note that this policy falls due for renewal on 9th September 1993. I regret to advise however that we will not be inviting renewal. All cover will automatically cease with effect from 12 noon, 9th September 1993."

10

The fourth and fifth policies described above each contained the following condition:

"13. Cancellation."

11

The Insurer may cancel this policy or any section thereof at any time by sending 14 days notice by registered post to the insured at the insured's last known address and in such event the insured shall become entitled to a return of premium in respect of the unexpired portion of the period of insurance."

12

On the 24th August 1993 the Defendants wrote in respect of the fourth and fifth policies described above separate letters in identical terms to the second Plaintiff being the insured in each of those policies as follows:

"In accordance with our rights under the Cancellation Condition, we hereby advise that all cover shall cease under this policy on the 7th September 1993.

There will be no return allowed as we note that the renewal premium has not in fact been paid."

13

The Plaintiffs demanded that the Defendants should give reasons for their letters of the 24th August 1993 to the Plaintiffs, which the Defendants declined to do. The Plaintiffs accordingly instituted these proceedings by the issue of a plenary summons on the 26th August 1994 and in their statement of claim delivered on the 20th September 1994 the Plaintiffs claimed inter alia as follows:

14

a "(a) A declaration that the Defendant has wrongfully failed to disclose the reason (s) for the cancellation of several policies of insurance held not only by the company but also by its principal, Edmund Mallon on substantial property that he holds in his own name, regarding the policies and premises detailed at paragraph 4 of this statement of claim.

15

(b) An order directing the Defendants to disclose the reason (s) for the cancellation of each of those several policies of insurance forthwith.

16

b (c)..................

17

(d) A declaration that the Defendant is in breach of the provisions of the Competition Act 1991, as a result of:

18

1. Its failure to assist the Plaintiffs to obtain replacementinsurance.

19

2. Its anti-competitive policies

20

3. Its abuse of its dominant position."

SUBMISSIONS
21

Counsel for the Plaintiffs/Appellants submitted:

22

1. All insurers include in their proposal forms a question as to whether the risk proposed has been declined or cancelled by any other insurer. If it has and the Proposer cannot give the reasons for such declinature or cancellation to an alternative insurer then it will be impossible for him to obtain alternative cover in respect of the risk. Therefore there must be an implied term in the Defendants policies that in the event of a declinature or cancellation the reasons therefor must be given.

23

2. There must also be an implied term in the policies that the Defendants will do nothing to prevent the Plaintiffs from obtaining alternative insurance in respect of the risk which the Defendants have declined or cancelled.

24

3. Furthermore the Defendants must have an implied obligation to restore the Plaintiffs to the position which they enjoyed regarding obtaining insurance cover prior to their contracting with the Defendants.

25

4. All insurers want to know the reasons for a declinature or cancellation and this in itself is a concerted practice or activity contrary to Section 4 of the Competition Act 1991.

26

Counsel for the Defendants/Respondents submitted:

27

1. There can be no difference between the suggested obligation to give reasons for a declinature or a cancellation of a policy. If such an obligation exists where does it stop? Is the obligation confined to questions of insurance or could it extend to other contracts such as contracts of employment? The ramifications of such an implied term are startling.

28

2. The case of Glover -v- B.L.N. (1973) IR388 is of no assistance to the Plaintiffs in this case. In that case the contract of employment specifically provided for an enquiry before the Plaintiff could be dismissed from his position in the Defendant Company: the decision was that such an enquiry must be fairly conducted. In the present case the Defendants can cancel their policies or decline to renew them for any reason good bad or indifferent or indeed for no reason at all. This state of affairs completely negates the need for an advance hearing or enquiry and therefore one cannot review the reasons or procedures leading to such a decision. Authorities in regard to Public Law enquiries and the like are of no relevance or assistance in this case.

29

3. In regard to the Competition Act 1991the learned trial judge found that there was no concerted conduct nor any agreement restricting or distorting the market and there was evidence to support such decision.

30

Counsel for the various parties referred to quite a large number of authorities the principle ones being:

31

Glover -v- B.L.N. (1973) IR388

32

Sun Fire Office -v- Hart (1889) 14AC98

33

The Moorcock (1889) 14PD64

34

Liverpool City Council -v- Irwin (1977) AC239

35

Siney -v- Dublin Corporation (1980) IR401

36

Rajah -v- Royal College of Surgeons of Ireland (1994) ILRM233

...

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