The Third Party (Rights Against Insurers) Act 2010
The recent decision of Mrs Justice Yip DBE in the case of Keegan v Independent Insurance Company and Zurich Insurance PLC  EWHC 1992 highlights two areas brought into focus by the Act and which are likely to continue to trouble practitioners for some time to come.
The first concerns the date when a cause of action accrues. This is important because the Act is not retrospective in its operation (see Turner J in Redman v Zurich Insurance PLC  EWHC 1919) and so insurers have a keen interest in seeking to establish that a Claimant’s cause of action was fully complete (i.e. duty, breach and damage) prior to 1st August 2016. On the facts, Mr Keegan contracted mesothelioma as a result of his employer’s breach of duty between about 1972 and about 1984. A CT scan of his thorax in October 2020 revealed a “tiny right pleural effusion”, which was rightly considered to be no cause for concern at that time, but which medical evidence later showed was probably the first manifestation of the mesothelioma. Symptoms did not come on until January 2021. Mrs Justice Yip correctly identified that the 2010 Act was not engaged in situations where a Claimant’s cause of action was complete before 1st August 2016, but he or she did not acquire knowledge of injury until after that date. She went on to consider whether Mr. Keegan’s cause of action was complete in October 2020 or January 2021, and though her consideration was obiter dictum in that both dates were after 1st August 2016, her reasoning is nevertheless instructive. Firstly, she pointed out that the “trigger” litigation (Durham v BAI (Run Off) Ltd  UKSC 14) was concerned with when a disease was sustained or contracted for the purposes of clauses in insurance policies, so that it was entirely logical to look backwards from the fact of mesothelioma to consider the disease process which eventually caused it. Not so with the issue of determining when a cause of action accrues, which is a different question. Only when mesothelioma in fact occurs, is the cause of action complete. Following Cartledge v E. Jopling & Sons Ltd  AC 758 and Dryden v Johnson Matthey PLC  UKSC 18, Mrs Justice Yip considered that damage could be done before symptoms manifested themselves (both the pneumoconiosis in the former case and the alteration of the IgE antibody in the latter case were of themselves without noticeable physical symptoms). She considered the issue in the present case to be “a difficult and finely balanced one”, and despite expressing concern as to whether the estate of a person discovered to have such a tiny effusion in the course of a post-mortem could have any cause of action where no symptoms had manifested in life, she concluded that had the matter fallen to be decided, she “would probably have favoured the point at which the pleural effusion could be detected as representing the point in time at which it could be said as a matter of fact that the claimant had suffered material damage”. It is suggested that Mrs Justice Yip’s reasoning is logical and consistent with authority, and that it sharply points up the important conceptual distinction between having a complete cause of action and having knowledge of it for limitation purposes.
The second area brought into focus by the Act is that of actionable damage. Keegan was procedurally unusual in that the Second Defendant Zurich Insurance Company Limited settled before trial for a sum about £200,000 less than the Claimant’s final schedule of loss. Zurich, though present at trial, understandably played little part. The First Defendant, Independent Insurance Company Limited, was in liquidation, permission having been granted to proceed against it notwithstanding. Independent did not appear and was not represented. A limited role was played by the Financial Services Compensation Scheme (FSCS), which had knowledge of but did not join as a party to the action, and which had played some role in interlocutory proceedings. Its position was that it would not meet any judgment obtained by the Claimant, and that Independent were not caught by the 2010 Act, with the result that the Claimant should have restored the employer and issued against it. The result of this was that the Claimant’s schedule of loss went wholly unchallenged at trial. Whilst Mrs Justice Yip pointed out that the claim was not obviously inflated and that it was supported by proper evidence, she went on to say that “it may well be that, had the First Defendant been represented at trial and had submissions been made on its behalf, damages would have been assessed in a lesser sum than that claimed”. However, in the circumstances she declined to devote significant additional court time to quantum and the Claimant recovered in full as pleaded. This amounted to a “free hit” and it seems obvious that at least some reduction could have been made to his pleaded schedule had some mechanism been adopted by which a counter-schedule could have been served and relied upon.
Peter Morton, Barrister.