Insurance Contracts CP - Law Reform Commission

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10.58 However, that case concerned a contract of marine insurance and to extrapolate from that case a proposition denying aggravated damages to all insureds is quite out of step with later developments such as Farley v Skinner 64 . 10.59 The definition of aggravated damages in the 2000 Report is a broad one: it reflects the need to take account of the distress and injury caused to the plaintiff as well as the unacceptable conduct of the defendant. In the present context the Commission considers that the notion of utmost good faith will provide the court with a relevant benchmark, seen in this context, and in the light of other considerations set out in the 2000 Report. 10.60 The Commission believes that this residual compensatory power will be used sparingly and only in the most egregious cases. F Exemplary Damages and the 2000 Report 10.61 In 2000, the Commission, in its Report considered whether exemplary damages should be extended to cases of breach of contract. While the Commission considered that ―an extension of exemplary damages to contract cases would be at odds with the traditional concept of contract law as having an exclusively private law character‖, the Commission went on to say that the Commission ―does not, however, recommend that exemplary damages for breach of contract should be prohibited by legislation; rather, any possible development of the law on this matter, should be left to the courts where it can be judged on a case by case basis. 65 10.62 Subsequent developments in other jurisdictions suggest that there may be an argument for holding that an insurer who breaches the duty of utmost good faith should, in an appropriate case, be liable to pay exemplary damages whenever the court considers that a compensatory award will not punish a defendant for his outrageous conduct and provide a sufficient deterrent to the adoption of a similar course of conduct in the future. 10.63 In the Canadian courts, damages awards that have been made in favour of an insured for the insurer‘s breach of the duty of good faith, include non-compensatory elements in the quantum 66 . The Supreme Court of Canada, in Whiten v Pilot Insurance Company 67 upheld a jury award of $1 million in punitive damages where an insurer adopted an exceptionally reprehensible attitude to an insured‘s claim under a domestic fire insurance policy, forcing the insured to litigate by making contrived and unsustainable allegations that the insured had torched her own property. One feature of the case that is of some importance is the fact that the unfounded allegation of arson had a significant stigmatising effect on the reputation of the insured within the locality, and the distress that the insured experienced was significant and protracted; loss of this kind is often characterised as aggravated loss and it is possible to compensate a plaintiff for this kind of non-economic loss without characterising the exercise as constituting an award of exemplary damages. 10.64 Nevertheless, the majority of the Supreme Court of Canada, in Whiten, identified a need for some actionable conduct to be present if exemplary damages are to be awarded. Binnie J indicated that the situation before the Court was not simply a case of a breach of contract to meet the insurance claim: breach of the contractual duty of good faith is independent of and in addition to the breach of contractual duty to pay the loss. However, Binnie J stressed that Whiten was an exceptional case that justified an exceptional remedy. 64 65 66 67 [2002] 2 AC 732. See generally Swaby and Richards, ―Insurance Reforms: Rebalancing the Kilter?‖ [2011] JBL 535. LRC 60, para. 1.56. Eg. Fidler v Sun Life Assurance [2006] 2 SCR3; McQueen v Echelon General Insurance Co. [2009] Can LII 66152 (2002) 209 DLR (4th) 257; in South Africa Van Niekerk, ―Something must be Done about Insurer Bad Faith‖ (1998) 10 SA Merc LJ 110 bemoaned the lack of judicial activism in South Africa in relation to tardy insurers in a case where the insured‘s death by cardiac arrest may have been contributed to by the insurance dispute. 210
G Subrogation – Public Policy Exceptions 10.65 Subrogation is a right that is normally exercised by an insurer who, having paid a loss that has arisen under a policy executed as between the insurer and an assured, steps into the shoes of the assured in order to eliminate or reduce the loss in question. The insurer is able to obtain the benefit of any rights and remedies available to the assured against third parties and may in fact sue any third party in the assured‘s name. 10.66 In the leading Irish case of Driscoll v Driscoll, 68 O‘Connor MR said that: ―the foundation of the doctrine of subrogation is to be found in the principle that no man should be paid twice over in compensation for the same loss. The corollary to this is that a contract of indemnity against loss should not have the effect of preventing the insured from being paid once in full. I do not think that this can be disputed. 69 10.67 Examples of the first situation outlined above can be found in Irish cases such as Ballymagauran Co-operative Agricultural and Dairy Society Ltd v The County Councils of Cavan and Leitrim, 70 and Doyle v Wicklow County Council. 71 In both of these cases actions were brought for compensation for malicious damage against local authorities. The fact that the applicants had contractual actions against their insurers, or had actually been paid on the foot of insurance, did not provide a defence on the malicious injury claim. In Doyle v Wicklow County Council Griffin J, for a unanimous Supreme Court wrote that: ―it is irrelevant whether the applicant in the present case had insured against the risk of damage by fire or otherwise, or whether or not he had been paid on foot of his policy of insurance. If he had already been paid on foot of the policy of insurance he, as the insured, must account to the insurers for any benefit he receives from his claim for compensation.‖ 72 10.68 Part of the subrogation principle involves a more proactive proposition: ―[t]he insurer is subrogated to any claim of any character which the assured is entitled to bring in proceedings against a third party to diminish his loss.‖ 73 While the insurer cannot recover against the wrongdoer in circumstances where the insured could not have successfully mounted an action, the possibility that the insured could have theoretically recovered against a wrongdoer may leave open subrogation rights. It matters not that the insured would not have commenced proceedings for obvious reasons, ie, the wrongdoer was a family member or an employee, the likelihood that such a person had, or was expected to have, separate insurance being non-existent. 10.69 In Lister v Romford Ice and Cold Storage Co Ltd 74 an insurer was held entitled to be subrogated to the right to sue an employee of the insured who had injured a fellow worker in the negligent carrying out of employment duties. Because the contract of employment did not give the negligent employee an express or implied right to be indemnified by the employer for the negligent carrying out of contractual duties, the way was left open for the insurer to utilise subrogation rights without the consent of the employer – indeed, even if this was contrary to the wishes of the employer, not least because the insurer can conduct subrogation litigation in the name of the insured. 10.70 There are two situations in which this subrogation right has a public policy dimension. i) Where the insured and the wrongdoer live together in a family unit (and possibly where those persons are related or part of a social unit analogous to that of a family) 68 69 70 71 72 73 74 [1918] 1 IR 152. Ibid at 159 [1915] 49 ILTR 49 [1974] IR 55. Ibid at p74. McGillivray, paragraph 22-036. [1957] AC 555 211
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CONSULTATION PAPER INSURANCE CONTRA
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MEMBERSHIP The Law Reform Commissio
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ADMINISTRATION STAFF Head of Admini
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ACKNOWLEDGEMENTS The Commission wou
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TABLE OF CONTENTS Table of Key Legi
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CHAPTER 4 (3) Factors covered by an
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(10)Enforcement 149 CHAPTER 7 FORMA
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TABLE OF KEY LEGISLATION Assurance
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Pg No. Economides v Commercial Unio
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Ireland Ltd Pg No. Roselodge Ltd v
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D Regulation and Supervision of Ins
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has been the Consumer Protection Co
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this definition would apply both to
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Commission provisionally recommends
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2005 Final Report and Recommendatio
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in Coleman accords with data protec
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functions may in the future be merg
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estrictions on the ability of the O
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(2) Adverse comments on the propose
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harmonisation of insurance contract
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1.49 Before leaving the general iss
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(2) Decisions of the Financial Serv
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uberrima fidei, regulatory requirem
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1.68 The Commission provisionally r
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2.03 In contrast, a non-indemnity
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CJ expressed the view that it made
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2.18 In the House of Lords, Lord El
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Lord Eldon formulation, 45 overrule
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interest in respect of the property
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drawings themselves, Auld LJ and Si
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the judges to complicate the law by
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Insurance in the UK, Ireland and EU
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any existing doubt, or prevailing m
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(2) A potential financial loss reco
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to the extent of monies actually ex
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took out a life insurance policy on
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2.86 The Commission invites submiss
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and social provision be integrated
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and deny enforceability. The leadin
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(6) Defining Insurance Contracts in
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3 CHAPTER 3 DUTY OF DISCLOSURE A In
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the Ohio case of Hartford Protectio
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the basis that the insurance contra
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that which the signatory could reas
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―(i) In order to be entitled to a
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withholding information on the basi
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public interest in running blockade
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In Manor Park, McMahon J. took a si
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at the precontractual stage. The de
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decisions in which the Ombudsman ha
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(8) The English Law Commission’s
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(10) Australia 3.88 In ALRC Report
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Article 3:103 Exceptions The sancti
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it is desirable to retain the duty;
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B Judicial approaches to limiting a
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will no doubt arise in the future.
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questions that are incapable of a y
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(1) Marine Insurance Act 1906 and m
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(3) Should the right to rescind be
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y English judges to any extent, and
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non-disclosure or misrepresentation
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Factually incorrect answers to a qu
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4.68 While the English and Scottish
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terms to be construed by reference
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conclusion, ―with considerable re
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the present was held not to be prom
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(10) Limiting the scope of the warr
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have been forthright in suggesting
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nature and potentially draconian na
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(b) that even though the loss was o
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whichever is the earlier event. 103
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5.67 Nevertheless, the law reports
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may properly consider to be relevan
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―It is easy to sympathise with th
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decisions, and case-law, that preve
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the terms of the insurance contract
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householder each assuming the other
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whether in all the circumstances it
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may be regarded as technical or unm
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―Basis of contract clauses would
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The court may be influenced by the
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―consumer‘s reasonable expectat
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of the term, particularly in the co
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National Consumer Agency would be t
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premium, thus taking the contract o
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the Provider could not provide the
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exceptions to these requirements in
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(l) the existence of guarantee fund
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Page 182 and 183: contains interesting and helpful ad
Page 184 and 185: in the Aro Road case who wrote that
Page 186 and 187: 8.11 The most visible demonstration
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Page 190 and 191: F Effects of fraud 8.27 Once the fr
Page 192 and 193: 8.36 In the case of composite insur
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Page 196 and 197: Insurance Corporation of the Channe
Page 198 and 199: not only an economic purpose, but a
Page 200 and 201: Article 6:104 Time of Performance (
Page 202 and 203: B The Problem in Context 9.04 The d
Page 204 and 205: D Exceptions to the Privity Rule (1
Page 206 and 207: 9.20 Because Ireland has not adopte
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Page 215 and 216: CHAPTER 10 REMEDIES A Introduction
Page 217 and 218: (4) Where the risk would have been
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Page 225 and 226: 10.38 The decision of Hirst J in Th
Page 227 and 228: 10.48 The Ontario Court of Appeal,
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Page 233 and 234: (ii) Subrogation - Employee Liabili
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Page 242 and 243: 11.09 The Commission invites submis
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Insurance Contracts CP - Law Reform Commission

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