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

• Jurisdiction: Ireland
• Judge: McCracken J.
• Judgment Date: 09 June 1995
• Neutral Citation: 1995 WJSC-HC 4172
• Docket Number: No. 5116P/1994,[1994 No. 5116P]
• Court: High Court
• Date: 09 June 1995

CARNA FOODS LTD v. EAGLE STAR INSURANCE CO (IRL) LTD

BETWEEN

CARNA FOODS LIMITED AND EDMUND MALLON

PLAINTIFFS

AND

EAGLE STAR INSURANCE COMPANY (IRELAND) LIMITED

DEFENDANT

1995 WJSC-HC 4172

No. 5116P/1994

THE HIGH COURT

Synopsis:

CONTRACT

Insurance

Terms - Insurer - Rights - Policy - Cancellation - Disclosure of reasons - Insurer not obliged to disclose reasons for cancellation or for refusal to renew policy - Implied term unjustified - Competition Act, 1991, ss. 4, 5 - (1994/5116 P - McCracken J. - 9/6/95) - [1995] 1 I.R. 526 - [1995] 2 ILRM 474

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

INSURANCE

Policy

Terms - Insurer - Rights - Policy - Cancellation - Disclosure of G7 reasons - Insurer not obliged to disclose reasons for cancellation - (1994/5116 P - McCracken J. - 9/6/95) - [1995] 1 I.R. 526

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

Citations:

COMPETITION ACT 1991 S4

COMPETITION ACT 1991 S5

DALY, STATE V MIN FOR AGRICULTURE 1987 IR 165

GLOVER V BLN LTD & ORS 1973 IR 388

RAJAH V ROYAL COLLEGE OF SURGEONS IN IRELAND 1994 1 ILRM 233

MOORECOCK, IN RE 1889 14 PD 64

SHIRLAW V SOUTHERN FOUNDRIES LTD 1939 2 KB 206

SOUTHERN FOUNDRIES V SHIRLAW 1940 2 AER 445

1 Judgment of McCracken J. delivered on the 9th day of June, 1995.

2 There is a very nett issue in this case, namely whether an insurance company is obliged to give reasons for the cancellation and/or refusal to renew a policy. The facts may be stated shortly.

3 Carna Foods Limited ("the Company") is controlled by Edmund Mallon ("Mr. Mallon"). The Company owned an abattoir and meat factory in Castleblayney and Mr. Mallon owned certain premises in Castleblayney and Dundalk. The Company and Mr. Mallon had various insurance policies with the Defendant in relation to the several premises and the businesses carried on therein. Basically these policies covered fire, employer's liability and public liability.

4 On 30th June, 1993 there was a serious fire at the Company's premises at Castleblayney and on 24th August, 1993 the Defendant notified the Company and Mr. Mallon that it would not invite renewal of three of the policies which were due to expire on 9th September, 1993, and that it was cancelling the other two policies as of 7th September, 1993. Insofar as the purported cancellation is concerned, this was done under Clause 13 of the policy conditions, which clause is identical in both cases and reads as follows:-

"The insurer may cancel this policy or any section thereof at any time by sending fourteen 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."

5 The Plaintiffs do not challenge the right of the Defendant to refuse to renew or to cancel a policy under Clause 13. What they seek is a declaration that the Defendant has wrongfully failed to disclose the reasons for the cancellation of the several policies of insurance and an order directing the Defendant to disclose the reasons for the cancellation of each such policy. While the relief claimed in the summons is stated to relate to the cancellation of the policies, as I understand it, the same case is made in relation to the refusal to renew, and insofar as the pleadings may not cover this, I will give leave to amend. The Plaintiffs also seek a declaration that the Defendant is in breach of Sections 4 and 5 of the Competition Act, 1991.

6 The Plaintiffs claim that the effect of the Defendant's action in refusing to disclose reasons is that they are unable to obtain any insurance in substitution for the policies with the Defendant which have been cancelled or not renewed, and Mr. Mallon also claims that he has been refused insurance on his private dwellinghouse because he disclosed, as he was bound to do, the refusal of the Defendant to continue to cover him under the policies which are the subject matter of these proceedings. Strangely, neither Plaintiff has in fact sought to obtain alternative insurance, but the Plaintiffs" broker gave evidence that he considered the Plaintiffs to be uninsurable, although he acknowledged that there were insurers, particularly some syndicates at Lloyds, which did specialise in high risk insurance. There was also evidence from Mr. Edward Coogan, the former commercial property manager of the Hibernian Insurance Company, who confirmed that the Plaintiffs would have difficulty in obtaining cover if no reason was given, but he also said that the Plaintiffs would only be in a marginally better position if reasons had been given.

7 The Plaintiffs" arguments, aside from the Competition Act, are based on two principles. Firstly, that it is an unjust and an unfair contractual term to allow the Defendant to refuse cover without giving reasons, and, secondly, that the Court should imply a term in the contracts of insurance that reasons would be given.

8 With regard to the first contention, I have been referred to several authorities which deal with fairness of procedures. There is no doubt that cases such as The State (Daly) v. The Minister for Agriculture, (1987) IR 165, show that where a decision is taken to exercise a function in the public realm, the person affected is entitled to know the reasons for the decision. This is because statutory powers must be determined and exercised reasonably. The Plaintiffs here seek to extend this principle into the realm of private contractual relationships. The only case which would support...