Insurance Contracts CP - Law Reform Commission

(a)
An insurer cancelled a motor insurance policy by telephone call when the policy itself required to
to be done in writing. Compensation of €800 ordered for ―inconvenience and confusion‖ caused.
An insured suffered injuries while on a skiing holiday in Austria. Delays in processing payments
on a holiday insurance policy led the Austrian health provider to threaten legal action for recovery
of the outstanding fees. Compensation of €200 ordered for ―stress and inconvenience caused‖
Aggravated Damages and the 2000 Report
10.53 In the Report Aggravated, Exemplary and Restitutionary Damages 59 the Commission drew
attention to the distinction between exemplary damages and aggravated damages. While the courts
utilise exemplary damages so as to punish a defendant and deter the defendant and others from
embarking on similar outrageous conduct in the future, 60 aggravated damages are regarded as being
compensatory. However, the conduct of the defendant in acting in blatant disregard of the reasonable
expectations of the plaintiff may of course be seen as a factor that could deepen the sense of hurt and
distress felt by the plaintiff and the Commisison observed that while some Irish courts have identified
aggravated damages as compensatory, some judges have referred to the conduct of the defendant in
ways ―which sit uneasily with a compensatory definition‖. 61 This terminological confusion led the
Commission to recommend a legislative measure defining aggravated damages thus:
―Aggravated damages are damages to compensate a plaintiff for added hurt, distress or insult
caused by the manner in which the defendant committed the wrong giving rise to the plaintiff‘s
claim, or by the defendant‘s conduct subsequent to the wrong including the conduct of legal
proceedings.‖
10.54 It is perhaps suprising that the Commission did not recommend that aggravated damages
should be available in breach of contract cases: at paragraph 5:26 the Commission recommended that
―aggravated damages should be available for all torts and for breach of constitutional rights.‖ In any
event several post-2000 cases hold that aggravated damages may be awarded so as to mark the way in
which a defendant has breached a contract, occasioning injury to the plaintiff outside any economic test.
10.55 In Dinnegan and Dinnegan v Ryan 62 a publican refused to provide contracted services to a
wedding party occasioning considerable distress and humiliation for the plaintiff bride and groom.
Damages of €6,000 were awarded to each of the plaintiffs. ―Stigma‖ damages within the context of
breaches of duty have been held to be available remedies for employees. 63 There is no doubt that future
case-law will continue to push at the boundaries of the compensatory principle while retaining, as a
general rule, the view that stress and disappointment occasioned by a commercial venture that goes awry
is not to be recoverable in an action for breach of contract.
10.56 The decision of Quirke J in relation to John Hennessy‘s riding accident, unreported but outlined
at paragraph 10.46 above, suggests that Irish Law has already provided aggravated damages to an
insured in circumstances when a claim has not been met by a bona fide defence on the part of the
defendant and the defendant‘s insurers. However, that claim may well have been brought in tort only.
Discussion has often focused on the possibility of establishing a distinct tort in relation to good faith as
well as the emergence of an action for breach of an implied term in a contract of insurance, but, within
this context, it is not necessary to go further than the view expressed in the Supreme Court of Canada in
Whiten in which existing damages principles were utilised in contract.
10.57 The Commission wishes to emphasise that, in most cases of commercial insurance, the view
expressed by the English Court of Appeal in The Italia Express, denying damages for distress will be
applicable for breach of a commercial contract.
59
60
61
62
63
LRC 60-2000.
Conway v. INTO [1991] 2 IR 305
Paragraph 5.15, citing Finlay CJ in Conway v INTO [1991] 2 IR 305.
[2002] 3 IR 178.
Orr v Zomax Ltd [2004] IEHC 47, McGrath v Trintech [2004] IEHC 342.
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