High Court Confirms That Third-Party Rights Against Insurers Are Restricted

Author:Ms April McClements
Profession:Matheson
 
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The recent High Court decision in Michael Murphy v Allianz Plc1 provides further clarification of the scope of Section 62 of the Civil Liability Act 1961 - in particular, the conditions which must be satisfied for its application.

This decision follows a number of similar determinations of the High Court in recent years and confirms the following important principles in relation to Section 62:

The insured, who has a liability insurance policy, must become bankrupt or die (if an individual), be wound up (if a company) or be dissolved (if a partnership or other incorporated association); Liability should be established in the underlying claim against the insured and quantum assessed before the insurer is joined to proceedings or sued; and The courts will recognise a valid repudiation by an insurer. Background

In Dunne v PJ White Construction Company2 the Supreme Court considered it to be "an inevitable consequence" of Section 62 that it creates a right of action in favour of an injured third party. Chief Justice Finlay held that in such proceedings, the onus of proof is not on a plaintiff to prove that the insurer has rescinded or repudiated the contract; rather, it is for the insurer to establish that there has been a rescission or repudiation.

The decision of Judge Gilligan in Murphy follows the recent High Court decisions in McCarron v Modern Timber Homes Limited and Hu v Duleek Formwork Limited (in liquidation). Each of these cases also concerned an employers' liability claim and an application by the insurer to strike out proceedings on the basis that they disclosed no reasonable cause of action and were bound to fail.

Facts

The plaintiff in Murphy suffered an injury on a building site during his employment as a bricklayer and issued proceedings against the main contractor and the subcontractor. The insurer sought outstanding wage declarations from the main contractor's broker under the relevant policy condition and reserved its rights under the policy pending resolution of the outstanding wage declarations and any other issues. Neither the main contractor nor its brokers furnished the insurer with the documents sought and as a result indemnity was withdrawn under the policy. The main contractor was subsequently struck off the Register of Companies.

The court stated that it is clear from the wording of Section 62 that the insured company must be one which has been wound up in order for Section 62 to apply. The insured company in this...

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