Insurance Company Need Not Disclose Cover

Winning a legal case is one thing. Getting paid is quite another, so it makes good sense to do your homework on a defendant to make sure that they are ‘good for the money’ before you undertake litigation.

Much information is available. Credit ratings can be ascertained, and company accounts can be obtained from Companies House. One potentially very valuable item of information may be the extent to which the defendant has insurance cover against the claim. However, this information is not normally in the public domain. If the ability of the defendant’s insurance policy to meet a whole claim is in question (because the claim may be over the limit on the insurance policy), what right has the claimant to information which will help them control their own litigation risk?

A recent case addressed this point. It arose because of a fire which allegedly resulted from work being undertaken by a contractor at a warehouse. The loss would lead to a claim exceeding £1 million and the warehouse owners were worried that the contractor’s public liability insurance plus its assets would be insufficient to meet the claim and the related legal costs. In any event, the insurer denied it was liable, claiming that the contractor had breached the conditions of its insurance.

The warehouse owners were concerned that if they succeeded in their claim, as they expected to do, the contractor would become insolvent and they would then have to seek redress against its insurer. They therefore needed to understand the terms of the policy and the applicable level of cover.

As a first step, they asked for disclosure of the contractor’s insurance policy from the insurer, who refused to provide it. The claimants then went to court to obtain an order for it to be disclosed, but the judge refused to exercise her discretion to do so as the circumstances were not sufficiently exceptional for her to order disclosure of a solvent insured’s insurance policy contrary to established practice.

Says John Keeble, “There is no automatic right to information about the insurance policy in place in circumstances such as this. One possible solution may be to require contractors to disclose their insurance policies when entering into a contract.”

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