Direct Recourse to Insurer I
There is no general right for a person who has suffered damage, to have direct recourse to an insurance policy which the defendant may have contracted, in order to indemnify himself in relation to liability for such damage. Legislation in Ireland allows recourse to such a policy, in limited circumstances, where the defendant is insolvent. This is in contrast to the United Kingdom, where legislation provides a general right of against the defendant’s insurer, in the event of the defendant’s insolvency.
The Civil Liability Act provides that where a person whose liability is insured dies, becomes bankrupt or becomes subject to insolvency, monies paid under the policy are to be applied only in discharging insured claims and are not to be available to his creditors generally. Where a claimant has obtained a judgment against an insured who cannot satisfy it for those reasons, he may require that the proceeds of the policy be made available to satisfy the judgment. The policy proceeds are not part assets available to creditors generally
The Irish legislation does not transfer the rights of the defendant on the policy to the claimant. Unlike the position in the UK, the claimant does not “step into the shoes” of the insured defendant and cannot claim or arbitrate on the policy. If the policy is not valid or enforced in accordance with its terms, then it is not available. It appears there is no direct right against the insurer and that it is necessary to sue the insured first. A claimant must prove the fact of a policy, its validity and applicability.
Damages due to employees are preferential debts in the winding up of a company. This would be relevant in the case of under- insurance. In the leading English case on the equivalent provision, it was held that the public liability policy, being a policy of indemnity, the liability only arose when the insured was obliged to indemnify.
Direct Recourse to Insurer II
There is no general right under Irish law for a party who has suffered a civil wrong, to sue the insurer who covers the liability of the party at fault. This differs to the position in England and Wales. There is limited legislation in the context of personal injuries.
The right under the policy arises when the obligation to indemnify occurs. This commences the limitation period. This is so, even if certain other matters are not yet ascertained and are expressed to be conditions precedent. The commencement of the Statute is postponed if the contract provides that the insured is not deemed to have suffered a loss until some later date, that that on which the insured risk occurs and the right of indemnity arise.
The Road Traffic Act in Ireland allowed claimants to enforce directly against the insurer in certain limited cases in respect of claims which are the subject of compulsory insurance under the Road Traffic Act. Similar provisions apply under the Civil Liability Act. The Civil Liability Act applies, where a person who is insured has died or becomes insolvent.
Under the Civil Liability Act when a person or a company which is insured under an insurance policy dies, becomes bankrupt or is wound up, the monies under the policy are to be applied only in discharging valid claims against the insured, in respect of which monies are payable. The assets are not assets of the insured or may not be used to pay debts, other than those the subject of the insurance cover.
Direct Recourse to Insurer III
There may be a right to proceed directly against the insurer where a judgment has been obtained by the claimant. The Civil Liability Act provisions replace the Road Traffic Act provisions of the same year being enacted.
It appears necessary to first obtain a judgment against the defendant before proceeding to claim against the insurer. There is Supreme Court support for the notion that there might be a direct right of action against the insurer. However, the case has been strongly criticised.
Unlike the position in England, there is no provision in Ireland to reinstate a company for the purpose of suit for a civil wrong. This may lead to lacunae and recovery in respect of latent injury.
Trust or Assignment
The rights of an insured under a material damage policy is presumptively personal. A third party who has no material interest in the property has no basis for a claim under any policy as he has not suffered loss. The rights under the policy are a claim to unliquidated damages only and are not treated as a debt.
An insurance policy may be held on trust for another or assigned. A trust may be established over the benefit of a policy on general equitable principles, subject to public policy considerations.
Many insurance policies, are by way of investment for the benefit of third parties and are framed in such terms. They may cover a class of insured persons such as employees and others notwithstanding that they are paid for by the employer. There may be a group policy providing for employees and other groups providing insured benefits, such a pension, illness or accident cover.
The benefit of a policy may be assigned. This is commonly undertaken in the case of investment and certain indemnity policies. For example, under a mortgage, a life policy over the borrower’s life might be assigned to the lender, as may the benefit of monies receivables under a material damage policy relating to a secured property.
In the case of property and material damage policies, the tenant frequently pays the landlord’s policy. The tenant may wish to avoid the risk of the insurer having a subrogation right against him arising from failures in his obligations to the landlord under the lease or at common law.
The tenants’ repairing obligation is usually limited by a clause providing that it does not apply where there is a valid insurance policy in place. The noting of the tenant’s interest alone does not make him partly to the policy or immune against subrogation. If he is named as a co-insurer, this will achieve the position. A person who is party to the policy is immune from subrogation. A subrogation waiver clause is of not directly enforceable by a third-party.
It might be argued that the policy is for the benefit of a third party, such as where a tenant has paid the premium. There have been some cases which suggest that the noting of a bank’s interest may be sufficient to prove that the policy is held on trust, where the bank has financed the purchase. This will not necessarily be the case and will depend on the circumstances.
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