Insurance Contracts CP - Law Reform Commission

consequence of the breach of contract (and in particular, damages that are reasonably foreseeable from
a refusal in bad faith to meet a valid claim); and (b) emerging principles of restitution.
10.43 The Commission invites submissions as to the period of time within which an insurer should
meet valid claims.
E
Non-Pecuniary Loss and Damages
10.44 If an insured seeks to recover damages for distress, stigma, injured feelings, physical or mental
injury occasioned by the way in which an insurer processes or rejects a claim, and the court finds that the
insured‘s complaint has some validity, an obstacle to recovery may involve principles of remoteness of
damages. In general terms, commercial contracts may be attended by stress, but a plaintiff is unlikely to
recover damages for mental distress created by a commercial contract that is breached by a defendant.
In one recent English case damages for stress and inconvenience occasioned to a ‗do it yourself‘
enthusiast when a flat pack, self assembly suite of wardrobes did not meet the measurements provided
and could not therefore fit into existing furniture units 45 .
10.45 Where however the contract in question has a predominantly non-commercial purpose or no
significant economic dimension to it – holidays, family occasions such as a wedding for instance –
damages for stress and disappointment can be recoverable. Furthermore, if the contract is one in which
the plaintiff can be said to have sought relief from a stressful situation, or contracted for a professional
service aimed at ameliorating some of the unfortunate events that attend human experience, remoteness
of damage principles may not be a bar to recovery. In Hamilton Jones v David & Snape (a firm) 46
Neuberger J awarded damages for mental distress caused by a firm of solicitors who conducted child
custody proceedings carelessly, permitting the children‘s father to take the children outside the jurisdiction
when appropriate procedures existed to prevent this. Holding that the claimant had engaged the firm to
obtain pleasure, relaxation, peace of mind and freedom from molestation, objectives that had not been
met, damages of £25,000 for mental distress were awarded. While there are no Irish decisions that hold
that an essential purpose behind an insurance contract is protecting the insured form foreseeable
disasters, it is submitted that consumer and small business insurance should not be regarded as
exclusively commercial contracts in the strict sense.
10.46 The decision of Quirke J, in a High Court action brought by a Dublin solicitor, John Hennessy,
in respect of injuries occasioned by a fall from a horse when undertaking a riding lesson at Adare Manor
Equestrian Centre, Limerick, demonstrates that there is some room for non-economic loss to be
recoverable when an insurer is the substantive defendant. Mr Hennessy alleged the injuries were the
result of leaving him, as an inexperienced rider, alone and unsupervised. The defendant‘s insurers,
Quirke J observed, according to a press report 47 defended the action by way of ―a most serious allegation
of fraud against Mr Hennessy which was maintained over two full days of evidence. This allegation was
made with disregard for the consequences for his reputation, the judge added.‖ Damages of €45,000
were awarded to compensate Mr Hennessy for his injuries and €30,000 in aggravated damages were
awarded ―to compensate him for the added hurt caused by the defendants ―outrageous conduct‖ and to
deter the defendant and his indemnifiers from similar conduct in the future.‖
10.47 Because of the fact that there are no Irish cases in which the availability of damages for breach
of any duty of good faith has been considered, one must consider how the Marine Insurance Act 1906
addresses the issue of an available remedy. Section 17 indicates that the only remedy is avoidance, and
in the leading case of Banque Financiere de la Cite SA v Westgate Insurance Co 48 the House of Lords
approved the reasoning of the Court of Appeal; in English law therefore damages of any kind are not
available for breach of the duty of utmost good faith.
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46
47
48
Artis v MFI [2006] CLY 1013; on the general rule and exceptions see Farley v Skinner [2002] 2 AC 732
[2001] 1 WLR 924. In property insurance see AXA Insurance UK v Cunningham Lindsey UK [2007] EWHC
3023 (TCC).
See ―€30,000 awarded to solicitor over fraud accusation made against him‖ Irish Times May 13, 2009.
[1991] 2 AC 249.
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