Insurance Contracts CP - Law Reform Commission

B
The Problem in Context
9.04 The decision of the Privy Council in Vandepitte v Preferred Accident Insurance Corporation of
New York 6 clearly illustrates two formidable obstacles to third party recovery under an insurance contract.
Mrs V was injured in a motor accident whilst travelling as a passenger in a vehicle. The driver of the
other vehicle, Miss JB was a minor driving her father‘s vehicle with his permission. Miss JB was held to
have been driving the vehicle negligently. Damages were awarded in favour of Mrs V but judgment was
not satisfied; the relevant British Columbia statutory provision 7 indicated that where a person incurs
liability for injury or damage, that person being insured, if there is judgment against that person which is
unsatisfied, ―the person entitled to the damages may recover by action against the insurer the amount of
the judgment up to the face value of the policy, but subject to the same equities as the insurer would have
if the judgment had been satisfied.‖ While Miss JB‘s tort, as a minor, would have led to a claim 8 against
her father, REB (who had given permission for Miss JB to drive the vehicle) being successful, Mrs V
brought the action in tort against Miss JB directly, seeking to invoke the statutory provision above. While
the British Columbia courts awarded damages against Miss JB‘s insurers, the Supreme Court of Canada
overruled the Provincial Courts. 9 A further appeal to the Privy Council was dismissed. Lord Wright,
giving judgment for the Privy Council indicated that in order to succeed under the British Columbia Statute
it has to be shown that Miss JB was a party to the contract. In this regard, the policy itself referred to the
insured and directed that the indemnity also extended to persons legally riding or operating the vehicle
with the permission of the insured. Thus, while the indemnity was intended to be of benefit to Miss JB,
the Statute could only be operative if Miss JB was insured against the liability. Lord Wright explained the
thrust of Mrs V‘s arguments thus:
―The contention was put in the alternative, either that Jean Berry was directly and in law a party
to the contract being within the description of the persons other than R.E. Berry to whom the
indemnity was available, or that, if not in law a party to the contract, she was cestui que trust of
the promise contained in the contract to extend the indemnity to such a person as herself, R.E.
Berry having so stipulated as trustee.‖ 10
9.05 The first contention, that REB contracted as agent for his daughter, was rejected on the basis
that there was not intention on REB‘s part to contract other than for himself. Even if some such intention
existed ―he had no authority from [JB] to insure on her behalf and at no time did she purport to adopt or
ratify any insurance even if made on her behalf.‖ Lord Wright also rejected the second contention, that is,
that the ―insured‖ could be interpreted so as to describe both REB and Miss JB because REB created a
trust in the insurers promise to indemnify for Miss JB as a beneficiary. Again, the action failed for want of
any proof that REB had any intention to constitute a trust in the form of the promise of indemnity; if
anything was likely to follow from persons being injured whilst Miss JB was driving his motor vehicle.
JEB, ―if he read the clause or thought about the matter at all, he would naturally expect that if she did
damage, the claim would, under the Act quoted, be against him, as she was a minor living in his family.‖ 11
9.06 With the exception of the specific provisions that have been enacted in road traffic legislation in
order to address compelling public policy considerations arising out of motor accident claims, Irish law still
reflects Vandepitte in respect of third party ―rights‖ in insurance contract law. While there are some
nineteenth century decisions that pre-date the Vandepitte analysis (eg Kenney v Employers‟ Liability
Insurance Corp 12 ) and which suggest a more ‗liberal‘ approach to the agency or trust exceptions, the
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[1933] AC 70.
Section 24 of the Insurance Act 1925 (British Columbia).
Section 27, Motor Vehicles Amendment Act 1927 (British Columbia).
Preferred Accident Ins Co Of New York v Vandepitte [1932] SCR 22. Contrast Fraser River Pile and Dredge
Ltd v Can-Drive Services Ltd [1998] 3 WWR 177.
[1933] AC 70 at 76-77
[1933] AC 70 at 80
[1901] 1 IR 301.
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