Insurance Contracts CP - Law Reform Commission

(ii)
Subrogation – Employee Liability
10.74 Lister v Romford Ice and Cold Storage Co Ltd was cited with apparent approval by McCarthy J
in Sinnott v Quinnsworth 79 at least insofar as McCarthy J was considering whether a negligent employee
who injures another employee whilst driving a motor vehicle in the course of employment is entitled to be
indemnified by an employer under section 21(1) of the Civil Liability Act 1961. This question was
answered in the negative. However, in a very different context, that of subrogation rights of two insurers
arising out of the same incident in respect of which two overlapping policies are in place. McCarthy J
clearly viewed the logic of Lister as having unsatisfactory results. In the case of Zurich Insurance
Company v Shield Insurance Company Ltd, 80 a postscript to Sinnott v Quinnsworth itself, McCarthy J
remarked that the negligent driver , Edward Durning, in the view of one of the two insurance would be
personally liable to indemnify one of the insurance companies at least to 50% of the amount in question.
McCarthy J responded by stating that Irish law did not have such an effect:
―Happily, the employees of Quinnsworth, and indeed, any other employees including those of
insurance companies, who drive company cars and give lifts in the course of work to fellow
employees, are not faced with such dire consequences.‖ 81
10.75 It is arguable therefore that Irish law is somewhat ambiguous on the scope of Lister and its
relevance in Irish law. In Sinnott v Quinnsworth McCarthy J cited both the ratio decidendi of the majority
judgment, and the reasoning of the two dissenting Lords in relation to underlying policy, with apparent
approval. 82 These contrasting views, form one outstanding jurist, are understandable when bearing in
mind that McCarthy J was considering a range of distinct issues. The Commission will examine how
some other jurisdictions have addressed the issue of public policy limitations on subrogation rights.
(2) Limitations on Subrogation Rights
(a)
The Principles of European Insurance Contract Law
10.76 Article 10:101(3) contains an important provision that addresses these public policy
considerations in a quite sweeping fashion:
―The insurer shall not be entitled to exercise rights of subrogation against a member of the
household of the policyholder or insured, a person in an equivalent social relationship to the
policyholder or insured, or an employee of the policyholder or insured, except when it proves
that the loss was caused by such a person intentionally or recklessly and with knowledge that
the loss would probably result.‖
10.77 The notes to Article 10:101(3) provide the following comments: 83
―National legal systems deal with the issue covered by this paragraph in different ways, but at
least some of them provide for similar restrictions on insurer‘s subrogation rights and there are
equivalent voluntary ones elsewhere. The purpose of these restrictions is to prevent the social
harm that could result from a person appearing to bring a legal action against someone with
whom he or she might be in an extremely close relationship, even if in reality the action is
brought by the insurers. There are sound policy reasons for providing such exclusions. To
take a simple example, it does not seem sound to allow an insurer who has indemnified the
owner of, say, a vase whom it has indemnified, to claim against the owner‘s partner who was
simply careless in causing the vase to fall to the floor and break.
It is clear that such restrictions do not apply when the insurer can prove that the defendant
caused the loss deliberately or recklessly and with knowledge that loss or damage would
probably result....there is no good policy reason to exempt from liability someone who has
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[1984] ILRM 523.
[1988] IR 174.
[1984] ILRM 523.
[1984] ILRM 523 at 537-8.
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