Insurance Contracts CP - Law Reform Commission

D
Exceptions to the Privity Rule
(1) Exceptions via judge-made law
(a)
Agency
9.09 The law of agency allows a principal to enforce a contract even if the principal is undisclosed or
the principal‘s identity is unknown. It is now clear that this situation is applicable to insurance contracts. 19
Situations where the agency exception has been invoked in general terms involve sometimes convoluted
contractual analysis in response to commercially compelling circumstances. 20
(b)
Trusts
9.10 This was at the heart of the Vandepitte litigation and cases such as Watrs v Monarch Life and
Fire Insurance 21 consider the ―trust‖ notion as a kind of duty following upon bailment of goods. Resort to
the trust concept is uncertain in terms of results as an intention to create a trust must be found if the
argument is to be made out.
(c)
Assignment
9.11 Indemnity policies create a chose in action 22 which is assignable under the common law,
equitable and statutory rules on the assignment of choses in action. An examination of the law of
assignment is outside the scope of this Consultation Paper but the assignability of insurance contracts,
and the right to insurance moneys represent a very significant privity exception, constrained as it is only
by the insurable interest requirement for the assignor in life policies. 23
(d)
Statutory Exceptions
9.12 The injustice that decisions such as Vandepitte create has been recognised by the Oireachtas
by way of a number of statutory enactments that allow third parties to proceed against an insurer.
9.13 Section 7 of the Married Women‟s Status Act 1957, based largely upon section 11 of the
Married Women‟s Property Act 1882 provides that a policy of life assurance or endowment expressed to
be for the benefit of, or by its express terms purports to confer a benefit upon, the spouse or child of the
insured, is enforceable by that spouse or child by way of a statutory trust.
9.14 Section 76(1) of the Road Traffic Act 1961 24 allows a third party making a claim in respect of
injuries or damage caused by an insured motorist to proceed directly against the motorist‘s insurer by way
of service of a notice detailing the claim or a judgment obtained against the insured.
9.15 Section 62 of the Civil Liability Act 1961 affords a third party with rights to proceed against an
insurer in cases of the death or personal or corporate bankruptcy of the insrued. Section 76(4) of the
Road Traffic Act 1961 contains a similar provision. In the 2008 Report on Privity of Contract, the effect of
section 62 is stated at paragraph 1.43 (footnotes abridged):
―Section 62 of the Civil Liability Act 1961 states that where an individual who has effected a
policy of insurance in respect of liability or a wrong becomes a bankrupt or dies, moneys
payable to the insured under the policy are only applicable in discharging valid claims against
the insured. No part of the insurance money is to be applicable to the payment of the other
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Siu Yin Kwan v Estern Insurance Co Ltd [1994] 2 AC 199: National Oilwell Ltd v Davy Offshore (UK) Ltd
[1993] 2 Lloyd‘s Rep 582.
Prentis Donegan and Partners Ltd v Leeds and Leeds Co [1998] 2 Lloyd‘s Rep 326. See also The Zephyr
[1985] 2 Lloyd‘s Rep 529.
(1856) 26 LT 217. See also Commercial trusts relating to goods such as the jewellers‘ block policy.
Re Moore, Ex parte Ibbetson (1878) 8 ChD 519.
See generally MacGillivray, Ch 20. Life policies have been assignable since the Policies of Assurance Act
1867: MacGillivray, Ch 24.
Hayes v Legal Insurance Co [1941] Ir Jur Rep 40; Herlihy v Curley [1950] IR 15; O‟Leary v Irish National
Insurance Co [1958] Ir Jur Rep 1.
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