Professional negligence update

To what extent is there an obligation to disclose details of a defendant’s professional indemnity insurance cover to a claimant? A frequent request by claimants in professional negligence litigation is that ?the defendants provide details of their professional ?indemnity cover.

For those defendants for whom professional liability insurance is compulsory (excluding financial services), regulation 8(n) of the Provision of Services Regulations 2009 requires the professional to make available to EU users ?of their services the contact details of their insurers and ?the territorial coverage of ?their insurance.

Professional and regulatory bodies may also make specific rules in this regard: for instance, solicitors are required to give a claimant details of their participating insurer in relation to the compulsory layer of insurance, the insurer’s contact details and policy number, pursuant to paragraph 18 of ?the SRA Indemnity Insurance Rules 2013.

However, claimants frequently seek more information than this, such as information about policy limits or confirmation as to whether insurers have accepted that they are at risk. Defendants generally consider this information to be commercially sensitive and confidential between themselves and their insurers, and therefore resist such requests.

Perennial issue

It is, perhaps, proof of the perennial nature of this issue that the High Court has had cause to consider it twice this year, in Dowling v Bennett Griffin [2013] EWHC 1995 (Ch) and, most recently, in XYZ v Various companies (PIP Breast Implant Litigation) [2013] EWHC 3643 (QB). Defendants will welcome the fact that the courts have, in these recent cases, supported the position that details of insurance cover should not be obtainable by claimants, save ?in certain limited circumstances and to a limited extent.

This provides welcome clarification following debate on the issue in several court decisions in recent years, including in the personal injury case of Harcourt v Griffin [2007] EWHC 1500 (QB) in which the court had ordered that information be provided, on ?the basis that this would allow the parties to deal efficiently and justly with the matters ?in dispute.

Dowling v Bennett Griffin

The claim in Dowling was a professional negligence action against a firm of solicitors (Bennett Griffin), arising out of their handling of earlier litigation between the Dowlings and an architectural practice (APAL). Although the Dowlings were successful in obtaining a judgment against APAL in the litigation, they encountered difficulties in enforcing the judgment as APAL did not notify their professional indemnity insurers of the litigation until after judgment with the result that the insurers avoided the policy and APAL was put into insolvent liquidation. The Dowlings managed to enforce part of their judgment against one of APAL’s directors personally, but the balance remained unenforced.

The Dowlings argued that Bennett Griffin had acted negligently in, among other things, failing to apply to the court for disclosure of details of APAL’s professional indemnity insurance cover during the course of the proceedings.

Although the judge recognised that Bennett Griffin and the Dowlings had concerns about APAL’s ability to satisfy any judgment and doubts concerning their insurance position (including whether they had notified their insurers), he rejected the Dowlings’ argument. He considered that the court would have had no jurisdiction to make an order for disclosure of insurance documents or information.

It would not have been possible to obtain this information by way of an application against insurers for pre-action disclosure because insurers were not “likely to be a party to subsequent proceedings” as the Dowlings would have no rights against APAL’s insurers under the Third Parties (Rights against Insurers) Act 1930 unless and until APAL became insolvent. Nor would an application against APAL for disclosure under part 31 or further information under Part 18 of the Civil Procedure Rules have succeeded as although insurance details were relevant to the commercial wisdom of continuing with the litigation, they were not relevant to the issues in the proceedings.

The judge noted that his conclusions in this regard were consistent with West London Pipeline & Storage Ltd v Total UK Ltd [2008] EWHC 1296 (Comm) in which the court, declining to follow Harcourt, dismissed an application by a defendant in the Buncefield explosion litigation for information and disclosure in respect of the insurance details of a third party against whom the defendant was pursuing contribution proceedings, and with the previous authorities of Bekhor v Bilton [1981] QB 923 and Cox v Bankside Members’ Agency [1995] CLY 4122. The court in West London Pipeline took the view that details of insurance are, generally speaking, a private matter between an insurer and an insured, orders for production of which would encourage speculative “deep pockets” litigation.

XYZ v Various companies (PIP Breast Implant Litigation)

The claimants are pursuing group litigation against various companies running private hospitals for supplying to them defective implants manufactured by French company PIP for use in breast implant surgery. The accounts of one of the defendants showed that it was technically insolvent (although still trading) and the claimants therefore sought an order, under either CPR part 18 or CPR r.3.1(2)(m), that it provides information about the nature and extent of its insurance arrangements. The claimants’ purpose was to determine if the defendant had sufficient insurance to fund its participation in the litigation to the end of the trial and if it could then meet any order for damages and/or costs.

The court accepted that the evidence indicated that the defendant might not be able to fund the litigation to trial, or meet any award of damages ?or costs.

Having considered both Harcourt and West London Pipeline, and in line with the decision in Dowling, the court found that there was no jurisdiction under CPR part ?18 to order disclosure of a party’s insurance arrangements as “the insurance position of ?the defendant is not a matter ?in dispute in these proceedings”.

The court then moved on to consider whether appropriate jurisdiction to grant the claimants’ application existed under CPR r.3.1(2)(m), which provides that any step may be taken for the purpose of “managing the case and furthering the overriding objective”. In relation to the claimants’ wish to obtain information about the defendant’s ability to meet any order for damages or adverse costs, the court held that such jurisdiction did not exist under this rule. The rule was concerned with case management, and therefore the issue of whether or not a claimant would be able to enforce judgment (after the litigation) did not fall within ?its scope.

However, the court was prepared to find for the claimant under r.3.1(2)(m) to the limited extent of ordering the defendant to provide witness evidence as to its ability to fund its participation (during the litigation) to trial and the conclusion of any appeal. This was, the court held, relevant to the allocation of court resources to, and thus to the management of, the litigation.

The court was particularly concerned that, without insurance, the directions and timetable which had been “fashioned with care and after significant expense” in this substantial piece of group litigation would be in jeopardy. For example, the judge was concerned that it would be necessary for new sample cases, with different claimants, defendants and defendant legal teams, to be selected, which would, among other things, waste court resources.

A private matter

Dowling’s confirmation that details of a defendant’s insurance are, generally speaking, unlikely to be disclosable absent insolvency on the part of the insured, lends support to the view taken in West London Pipeline that details of insurance are essentially a private matter between an insurer and an insured. XYZ builds on both earlier decisions, confirming the position under CPR part 18. XYZ suggests that it may be possible for claimants facing an insolvent, or technically insolvent, defendant to obtain limited information on their ability to fund the litigation, but it remains to be seen to what extent this approach will be applied outside the particular circumstances of XYZ, a substantial piece of group litigation involving complex ?case management.

Further, in many professional negligence cases the question ?of the extent to which defence costs are available is unlikely ?to be a real issue. Under the minimum terms of cover applicable to certain professions, such as the ICAEW and SRA minimum terms, professional indemnity insurers’ rights to decline cover, and in particular to refuse to advance defence costs, are limited, and there are mandatory requirements for defence costs to be in addition to the limit of indemnity.

It should of course be ?noted that the position of ?third parties seeking disclosure of an insured’s insurance arrangements is generally stronger against insolvent insureds. If the insured is insolvent, a duty arises under ?s2 of the 1930 Act to disclose “such information as may reasonably be required” to ascertain whether any rights against the insurer have been transferred to the claimant and for the purpose of enforcing such rights.

The position of third parties seeking disclosure of an insolvent insured’s insurance arrangements will be strengthened further by the ?new Third Parties (Rights ?Against Insurers) Act 2010 ?(s11 and schedule 1), as and when it comes into force.

For example, the Act widens the category of people who ?can be asked to provide information to any person who is able to provide it, which will include insurers, brokers and others authorised to hold ?policy information.

A clear list of the information which will be required to be disclosed is also set out in schedule 1, and includes whether the insured has been informed that the insurer has claimed not to be liable under the policy.

However, the recent case law confirms that, where there is no issue as to the solvency of a defendant, a claimant in professional negligence litigation will find it extremely difficult to obtain all but the most limited of information about the defendant’s ?insurance position. SJ