Obtaining a defendant’s insurance details

In XYZ v Various [2013] EWHC 3648, Mrs Justice Thirlwall is managing group litigation in which nearly 1000 women seek damages from companies running hospitals for supplying them with defective implants manufactured by the French company, PIP, for use in breast implant surgery. Some of the claimants also bring actions against the providers of credit cards pursuant to the Consumer Credit Act 1984 (as amended by the 2006 Act) and some bring actions against the surgeons who carried out the surgery. The total value of the claims is in the region of £13m plus costs on both sides. The court has held a number of case management hearings culminating finally in a timetable leading to trial in October 2014 on three issues in four sample cases in which Transform Medical Group (CS) Ltd (“Transform”) is, effectively, the lead defendant. On 22 November 2013 Mrs Justice Thirlwall handed down judgment after hearing an application by the Claimants for an order:

“that Transform do  provide information to the claimants as to the nature and extent of its liability insurance cover in respect of its potential liability in these proceedings to the relevant claimants on the group register and/or that it do serve a copy of the relevant insurance policy documents upon those said claimants, pursuant to CPR part 18 and/or part 3.1(2)(m)…”

Leading Counsel for the Claimants accepted in his submissions that the information was required because they had serious concerns about the financial position of Transform and they therefore needed to know whether it had sufficient insurance:

(i)    to fund its participation in the litigation to the end of the trial;
(ii)   to meet any order for damages; and
(iii)  to meet any order for costs.

It was conceded by Leading Counsel for Transform that on the evidence the Judge was entitled to conclude that, in the absence of any insurance, it may not be able to fund the litigation to trial, meet any award of damages or any award of costs and the Judge so concluded. Transform was found to be technically insolvent although still trading.

At paragraph 14 of her judgment Mrs Justice Thirlwall summarised Transform’s position as being:

“we have insurance but we are not prepared to say how much. Transform claimants must take their chances. The court will have to cross its fingers, as will the other litigants. If Transform collapses before the conclusion of the trial the court can rewrite the timetable. The other parties will bear their wasted costs.  The waste of court time and resources will be borne by the public purse.”

The battleground was whether or not the court had jurisdiction to make the order to compel Transform to provide the information as to its insurance as sought.  The Claimants argued that there was jurisdiction either pursuant to CPR 18 or CPR 3.1(2)(m).

CPR Part 18

CPR Rule 18.1 provides that:

“(i)     the court may at any time order a party to:
(a)    clarify any matter which is in dispute in the proceedings; or
(b)    give additional information in relation to any such matter, whether or not the matter is contained or referred to in a statement of case.
(ii)    (i) is subject to any rule of law to the contrary.”

The parties drew the Judge’s attention to two conflicting authorities on the ambit of CPR 19: Harcourt v Griffin [2007] EWHC 1500 (QB) and West London Pipeline and Storage v Total (UK) Ltd and TAV and others [2008] EWHC 1296 (Comm).

In Harcourt, the claimant in a personal injury application applied for an order under CPR Part 18 for further information to establish the full nature and extent of the defendant’s insurance cover. Liability had been settled on the basis of the claimant recovering 75% of the full claim which was said to amount to between £6m and £7.5m. A particular feature of the case was that as it was a personal injury case, the court had a power to order periodical payments, whether at the invitation of the parties or otherwise and the court had to consider whether periodical payments or a lump sum was likely to be a more appropriate form for all or part of an award of damages. The claimant submitted that neither he nor the court could take a view on whether periodical payments were appropriate without the insurance information. The defendants resisted the application on the grounds that:

(1) The claimant as an outsider to the insurance contract had no right to know any of its terms.

(2) The statutory exceptions to that rule derived from the Third Party (Rights Against Insurers) Act 1930, the Contract (Rights of Third Parties) Act 1999 and/or the legislation relating to the Motor Insurers Bureau all constitute statutory exceptions which prove the rule.  If Parliament had intended other exceptions, they would have legislated for them.

(3) If such a request were granted it would hand an unfair advantage to a claimant in litigation.

(4) If such a request were granted it would rapidly become standard practice in every case for a claimant to request such information and for defendants to reply in kind, setting up undesirable and wasteful satellite litigation.

(5) The periodical payments regime and the various obligations of the parties and the court do have an effect on what must be disclosed but the effect is limited in scope and does not extend to disclosure of the actual figure of the limit of cover and no such obligation could in any event arise until the date the parties would be required to indicate a preference for periodical payments or otherwise.

Mr Justice Irwin held that the nature and extent of the defendant’s insurance cover was not in itself a matter in dispute in the proceedings under CPR Rule 18.1(i)(a).  Nevertheless he considered that the wording of CPR 18 needed to be “interpreted reasonably liberally” and that:

“[T]he purpose of the jurisdiction must be taken to be to ensure that the Parties have all the information they need to deal efficiently and justly with the matters which are in dispute between them. Moreover, the wording need not be taken to imply that there must be a live disagreement about the relevant issue, since on very many occasions parties are properly required to furnish information pursuant to CPR r18 precisely to discover whether there is or is not a live disagreement between the parties on a given point. The whole thrust of the new approach to civil litigation enshrined in the Civil Procedure Rules is to avoid waste of time and cost and to ensure swift and, as far as possible, proportionate and economical litigation. Therefore, I have no hesitation in finding that if there is no rule of law or significant rule or practice to the contrary, then the wording of CPR r18 is broad enough to cover information of this kind.” [10]

The Judge thought that there “may be force” in many of the defendant’s arguments but nevertheless made the order and made the point that such an order should “only be ordered where a claimant (or where the situation arises, any other party) can demonstrate that there is some real basis for concern that a realistic award in the case may not be satisfied.”  On that basis, the Judge was confident that the jurisdiction would be “approached with caution” because there had to be “some real basis for suggesting that the disclosure is necessary, in order to determine whether further litigation will be useful or simply a waste of time and money.”

The Judge considered that his conclusion to order disclosure was supported by the logic in the decision in the Court of Appeal in Re OT Computers [2004] EWCA Civ 653.  That case was concerned however with section 2 of the Third Parties (Rights Against Insurers) Act 1930 (“the 1930 Act”) which gives third parties the right to obtain information about the liability insurance arrangements made by an insolvent insured.

In the later case of West London Pipeline, concerning the Buncefield litigation, Mr Justice Steel refused to follow Harcourt and found that the court had no jurisdiction under CPR Part 18 to require disclosure of a third party’s insurance position. The defendants in that case applied for information and disclosure in respect of the insurance arrangements of the third party on the basis that (i) the material was relevant to the issues, and/or (ii) it was necessary from the perspective of efficient case management.  The claim against the third party was for a contribution under the Civil Liability (Contribution) Act 1978. It appeared to be common ground that the insurance policies were not disclosable under CPR Part 31 and the Judge did not consider it arguable that the existence or scope of any insurance cover could be material to the issue of apportionment which was the relevant issue under the 1978 Act.  Accordingly, the Judge concluded that the insurance information did not relate to any in matter in dispute in the proceedings under CPR Part 18 (as indeed was the position in Harcourt).

Mr Justice Steel then turned to consider whether or not CPR Rule 18.1(i) could be construed more liberally, as had been done in Harcourt.  The stumbling block for the defendants however was paragraph 1.2 of the Practice Direction to CPR Part 18 which provides:

“A Request should be concise and strictly confined to matters which are reasonably necessary and proportionate to enable the first party to prepare his own case or to understand the case he has to answer.”

The Judge was of the clear view that the insurance position did not “impact on the ability to prepare the case let alone understand any potential defence”.  As a result, he said that the defendants’ submission required a “rewriting of both the rule and the practice direction” and refused the application as there was no jurisdiction to make the order sought.  Although he reached that conclusion with some considerable hesitation bearing in mind its conflict with Harcourt, there were a number of issues which Mr Justice Steel noted had not been brought to the court’s attention in that case, most notably the pre CPR cases of Bekhor v Bilton [1981] QB 923 and Cox v Bankside Members Agency C/A 29 November 1994 and the Law Commission’s Paper on Third Parties – Rights against Insurers Cm 5217 2001 which accepted that information about cover held by a solvent insured could not be compelled to be disclosed.

Faced with the conflicting decisions of Harcourt and West London Pipeline & Storage Ltd in XYZ, Mrs Justice Thirlwall took the same approach as in the latter case and held that the request did not come within Part 18 because the insurance position of the defendant was not a matter in dispute in the proceedings but also, in light of the Practice Direction, she could not “conclude that [Part 18] should be given a sufficiently broad interpretation to permit me to make the order sought here.”

Although not referred to in XYZ, this decision was in accordance with the unreported Queen’s Bench Division case of Arroyo v BP Exploration Co (Colombia) Ltd of 6 May 2010 and the first instance case decided earlier in 2013 of Dowling v Bennett Griffin [2013] EWHC 1995 (Ch.). In Dowling the Judge held that a solicitors’ firm had not acted negligently in not asking the court to direct that evidence of a party’s insurance be provided because, as Mr  Prosser QC (sitting as a  Deputy High Court Judge) stated:

“Such an application would have had to be made either under CPR Part 31 or under CPR Part 18. As for Part 31, the insurance documents were clearly not subject to standard disclosure: they neither supported the Claimants’ case nor adversely affected [the Defendants’] case.  Nor, in my view, was there any possibility of specific disclosure of the insurance documents being ordered: they were not relevant to the issues, and it could not be said that they might lead to a train of enquiry enabling the Claimants to advance their own case or damage their opponents’ case.  And as for Part 18, this provides that a court may at any time order a party to clarify any matter in dispute in the proceedings, or give additional information in relation to any such matter. But a party’s insurance details are not a matter in dispute in the proceedings within the meaning of Part 18 merely because it would be useful to know if the party is insured and has notified his insurers of the claim, for example in order to determine whether it is worthwhile pursuing the claim, and this was also the law at the relevant time.” (Here the Judge referred to West London Pipeline & Storage Ltd and the pre-CPR cases discussed therein).

CPR 3.1(2) (m)

However, unlike in the case of Harcourt and West London Pipeline & Storage Ltd, in XYZ the claimants also sought to rely on CPR 3.1(2)(m) which provides that:

“except where these rules provide otherwise, the court may…take any…step or make any…order for the purpose of managing the case and furthering the overriding objective.”

The Judge concluded that the rule is a case management rule and whether or not the claimants could enforce judgment is not a matter which affects case management and therefore she should not make any order requiring Transform to in any way inform the claimants as to whether they had sufficient information to meet any order for damages or to meet any order for costs.  However, she was of the view that:

“[W]hether or not Transform can fund this litigation to trial (and any appeal) does affect case management for the reasons I have set out earlier in this judgment. I remind myself that dealing with a case justly includes (see CPR 1.1 (2) (e)) allotting to it an appropriate share of the court’s resources. Were I to revise the directions now and it later transpired that Transform had been adequately insured all along, the litigation would plainly have consumed (indeed wasted) more than its appropriate share of the court’s resources for no good reason. That could not adequately be remedied in costs.

I am satisfied that CPR 3.1(2)(m) gives me the power to order Transform to provide to the court a witness statement (or statements) setting out whether Transform has insurance adequate to fund its participation in this litigation to the completion of the trial and the conclusion of any appeal. That knowledge will permit me to case manage this litigation now on the basis of adequate information.  I am sure that is also in accordance with the overriding objective.  It gives no unfair advantage to the claimants.  There is no prejudice to Transform.  The result will be that the court retains control over the use of its resources in this litigation.”

Whether or not Transform could fund the case affected case management because if it could not then it would have been necessary to select new sample cases with different claimants, different defendants and therefore also different legal teams.

Professional negligence claims

In professional negligence claims, a claimant is always keen to know the liability insurance position of the allegedly negligent professional in order to know whether the claim is worth pursuing. Where insurance is compulsory for a professional it must provide the user of its services with the contact details of their insurers and inform them of the insurance’s territorial coverage (see regulation 8(n) of the Provision of Services Regulations 2009).  However, this does not apply to professionals in financial services and often a claimant may wish to know considerably more about the professional’s insurance position.

It appeared, on the basis of Harcourt, that there was at least some scope for compelling a defendant to provide details of its insurance position although there are no reported decisions of that being successfully applied to achieve such disclosure. This is probably because the traditional approach to the disclosure of liability insurance rapidly prevailed in the case of West London Pipeline & Storage Ltd which was a more fully reasoned decision than Harcourt and as a result that position has not seriously been challenged since then. The decision in XYZ reinforces the traditional approach and, to that end, offers no comfort to the claimant in the professional negligence claim and no concern to the defendant who may wish to withhold its insurance details. However, XYZ shows that there may now be some instances in which a claimant could compel disclosure of those details pursuant to CPR 3.1(2)(m).  The key features of that case were that the defendant was technically insolvent and it was complex group litigation which had required careful case management which would have to be re-visited if the defendant could not continue to fund the litigation.

Although parties may come up with arguments as to why effective case management requires details of a party’s insurance position to ensure that they can litigate the matter to conclusion, I would suggest that it is unlikely that the court would exercise its discretion under CPR 3.1(2)(m) absent either similar facts to XYZ. The position in non-group litigation is therefore likely to remain as is, i.e. that a claimant will be unable to obtain any more details as to a party’s insurance than it is entitled to by reason of the Provision of Services Regulations 2009 or the relevant rules of the professional’s regulatory body unless it is in a position to rely on section 2 of the 1930 Act or the new provisions of the Third Parties (Rights Against Insurers) Act 2010 when they come into force.