The High Court case of “Hu v Duleek Formwork Ltd”  IEHC 50 (High Court, Peart J, 5 February 2013) concerned a workplace injuries claim by an employee against his employer and the employer’s insurer where the Court struck out the claim against the insurer on grounds that: a) the insurer had repudiated the employer’s policy for non-payment of excess; and b) the insurer had no obligation to inform the employee of the non-compliance of the employer with the terms of the policy.
This personal injuries claim related to a workplace accident where, the plaintiff, a carpenter, sustained injury to his thumb and claimed in negligence against his employer (first defendant). The case however also concerned repudiation of the employer’s insurance policy and an issue arose as to whether the employer’s insurer (second defendant) had a duty of care to the plaintiff .
The employer company had been placed in liquidation by the time the plaintiff`s proceedings were issued and subsequently the plaintiff obtained judgment in default of defence against the employer. There had however been a failure by employer to make an excess payment of €1,000. Therefore the insurer of the employer refused to cover the employer for the plaintiff’s claim.
The plaintiff was not disputing that the employer had breached a condition of his insurance policy . The insurer of the employer was joined as second defendant to the Proceedings where relief was sought by the plaintiff against the insurance company seeking a declaration that the insurance company was obliged under the insurance policy between employer and insurer to pay to plaintiff any sum awarded to plaintiff against employer. The plaintiff relied on Sect. 62 of the Civil liability Act 1961, which states :
“Where a person (hereinafter referred to as the insured) who has effected a policy of insurance in respect of liability for a wrong, if an individual, becomes a bankrupt … or, if a corporate body, is wound up … moneys payable to the insured under the policy shall be applicable only to discharging in full all valid claims against the insured in respect of which those monies are payable, and no part of those moneys shall be assets of the insured or applicable to the payment of the debts (other than those claims) of the insured in the bankruptcy … or in the winding up or dissolution, and no such claim shall be provable in the bankruptcy … winding-up or dissolution.”
Sect. 62 effectively ring-fences the insurance money payments where insured company is being wound up . The defendant insurer however submitted that Sect. 62 could not assist plaintiff; that it was only applicable where insurance money was actually payable; that the policy had been repudiated and therefore no money was payable. An application was made by the defendant insurance company to strike out proceedings as they disclosed no reasonable cause of action against the insurance company and/or the Proceedings were bound to fail.
It is important to emphasise that there was insurance in place, but the policy was worded in such a way that where a claim was made on the policy the insured person was required, when requested to do so, to make an upfront excess payment of €1000, even before liability for the accident had been established. Mr Justice Michael Peart commented that it would have been fairer in his view if the excess payment, if unpaid by the insured, was to be deducted from any payment that may be made to a third party claimant. It seemed to the judge to be a manifest unfairness that in such circumstances the entire contract was repudiated and where the injured third party was the one who loses out completely.
Ironically, the plaintiff was unaware of the reason for repudiation of the insurance contract until the application was made by the insurance company to strike out the proceedings. The plaintiff would have paid the excess himself to ensure the claim would be met by the defendant employer . Despite feeling sympathy for the plaintiff Mr Justice Peart held that there was no privity of contract between the plaintiff and the insurance company. The plaintiff could not seek to enforce the contract of insurance between the employer and the insurer . No money was payable to the employer under the insurance policy. Therefore Sect. 62 could provide no remedy for the plaintiff .
An issue also arose as to whether the insurance company had a duty to inform the plaintiff that a precondition to employer’s policy had been breached and whether it was possible to save the claim by amending the proceedings to claim in negligence against the insurance company. It was however held that as there was no proximity between plaintiff and insurance company the insurance company had no duty of care towards the plaintiff. There was accordingly no duty on the insurance company to inform plaintiff as to whether or not the employer has complied with the insurance policy. The insurance company could not be under a duty of care to potential claimants. This class of persons would be too vague and uncertain. The plaintiff’s claim against the insurance company was accordingly struck out as no reasonable cause of action against the insurance company was disclosed.
Had this company not been placed in liquidation there is no doubt that the employer, rather than risk an uninsured claim against the company, would have paid the excess premium to the insurer on being so notified. Was the liquidator of the company not however informed of this payment requirement? Claims of employees for wages and redundancies are preferentially rated in a liquidation. Why should compensation claims be any different where the implementation of the insurance policy depends on a payment of a relatively small insurance premium?
Was this not a case of the insurance company being unjustly enriched?