Some General Principles I
Deliberate Acts v Accidents
Insurance is not generally available in respect of acts deliberately undertaken. It is usually limited to cover for risks that are largely outside the control of individuals. However, the fact that the action is deliberate however does not necessarily preclude insurance, particularly where the act is not intentional.
Deliberately unlawful acts will not be covered. Public policy has long taken the view, that insurance should not cover the intentional commission of a criminal or wrongful act. This is based on the principle that the law will not uphold a claim based on illegality.
Notwithstanding the strict position, insurer does not seek to deny cover, even where injuries are caused by dangerous driving, or where they constitute death by dangerous driving or manslaughter.
As indemnity insurance exists to protect innocent third parties, the courts are very reluctant in practice to use public policy, to deny compensation. For example, a court is unlikely to rely on breaches of health and safety legislation, to cause an employer’s liability policy to be repudiated.
Moreover, EU law and the Road Traffic Act compulsory insurance require that cover be available for acts, even those which are intentionally criminal, arising out of the use of the vehicle in a public place.
Reinstatement of Material Damage and Loss
There are a number of mechanisms and clauses for dealing with the reinstatement of material damage. The contract might provide for the reinstatement of an equivalent modern building, in the case of destruction of an older building which is difficult to value. This clause looks at the functionality of the building, rather than the details of its composition, architecture and materials.
In the case of one-off objects which are difficult to value, it is desirable that the policy specifically values them. In the absence of prior valuation, the valuation determined on a claim may be somewhat arbitrary, subject always to be limit on liability for the policy.
Subrogation
Subrogation allows the insurer to recover against third parties in respect of liability for which it has indemnified the insured. The insurer stands in the shoes of the insured and may use its name. The right is generally expressed in the policy, although like contribution, it subsists as a general equitable principle.
Subrogation applies to any rights the insured may have, irrespective of their legal basis. Where the rights of subrogation relate to personal rights, particularly those covered by social insurance and social welfare schemes, subrogation is not available for public policy reasons.
Generally, the insurer succeeds to the insured’s rights so that if they are limited, they will be limited accordingly. It is a common law principle that the insured was not prejudice the rights of the insurer to subrogation.
A consequence of the insurer proceeding in the insurance name is that if the insured is wound up, dead or bankrupt, the right may no longer apply.
Subrogation Issues
Some cases hold that until the insured is indemnified, that subrogation does not apply. The rationale is that it is fair and reasonable that the insured control third-party recovery until he has fully recovered his loss. Other cases hold that this view is too wide.
Where there is provision for an excess or deduction on the policy, the courts have held that the insured is not entitled to recover from the third-party for such uninsured loss, until the insurer has been indemnified pursuant to its rights of subrogation. The right of subrogation takes priority over the uninsured excess, under this view.
Where there are both insured and uninsured losses, the insurer’s rights of subrogation arises where it has reimbursed the insured loss. The courts have implied into insurance contracts, an obligation on the part of the insured, to repay the insurer out of money recovered from third parties, the amounts to which the insured is entitled by subrogation. The right may be enforced against money recovered by way of a lien or proprietary interest. Similarly, where the policy is for an agreed value and this is paid, subrogation will arise.
Subrogation Waiver
In strict terms, a waiver of a right of subrogation does not apply for the benefit of a third-party, because it is not privy to the contract. However, such waivers are widespread and the courts are likely to find methods to extend their benefit to parties who are clearly intended to be beneficiaries.
In the absence of third-party contract benefit legislation in Ireland, the courts have fastened on the fact that subrogation is equitable in nature, and have been thereby unwilling to allow it to be exercised unfairly.
Fraudulent Claims
In principle, a person who makes a fraudulent claim may be denied recovery under the insurance entirely. This is on the basis of public policy and deterrence. The principle exists at common law but is also expressed in many policies.
The making of a fraudulent claim is a breach of the duty of good faith, regardless of whether the matter is expressed as a policy condition. The fraud should be material in the sense that it would impact on the insurer’s assessment of the claim. The principle applies to a claim which has a basis, but which is knowingly exaggerated.
Good Faith
The duty of good faith requires that full disclosure be made of the circumstances of a claim. In this context, the duty of disclosure is not as thoroughgoing as in the context of formation. Mere exaggeration does not in itself constitute fraud. A person may make his claim in the best terms possible, provided he acts honestly. He may submit, high high-end, but sustainable valuations.
Waiver
The principle of waiver may apply to the insurer in the context of a claim. If the insurer accepts a claim, notwithstanding that there is a basis on which it might be repudiated, it may be held to waive its rights to avoid the policy. The insurer must be aware of all the relevant facts, before it may be held to have waived its rights.
It is unlikely that a waiver would apply in the context of fraud. Estoppel is an equitable principle and is not available to a person who has committed fraud or dishonesty.
Double Cover and Contribution
Policies generally provide that if more than one policy covers same risk/matter, so that there is overlapping cover, each policy is to cover a rateable part of the entire liability. The principle is equitable and applies generally.
However, it is generally specifically provided for in insurance policies. The principle applies where the policies cover the same subject matter against the same risk on behalf of the same insured. Each must be in force.
The policy must not exclude the right of contribution. Contribution is analogous to subrogation. If all policies contain a non-contribution clause, then they cancel each other out and it appears that principle applies once again on an equitable basis. Otherwise, none would be liable which would lead to absurdity and injustice.