No jurisdiction to order disclosure of insurance cover

In a recent decision, the High Court has stated that it has no jurisdiction to order disclosure of insurance cover under CPR 18: West London Pipeline and Storage Ltd & Another v Total UK Ltd & Others [2008] EWHC 1296.

Background

The application arose in the context of the litigation arising from the explosion at the Buncefield Oil Terminal in December 2005. The first and second defendants ("Total") made a request for further information under CPR Part 18 in respect of the insurance arrangements of the third party ("TAV"). Total had brought a claim in contribution against TAV for a just and equitable apportionment of any liability which Total might incur to the claimants. It was alleged that TAV were the designers, manufacturers or suppliers of a safety switch that failed to operate whereby the overflow of fuel occurred leading to the explosion.

Total argued that the Court had jurisdiction under CPR Part 18 to order further information about and disclosure of insurance cover, on the basis that (i) this material was relevant to the issues in dispute and/or (ii) necessary from the perspective of efficient case management.

Decision

Steel J refused to grant the order.

As regards Total's first argument, Steel J noted that it was well established that a just and equitable apportionment under the Civil Liability (Contribution) Act 1978 could involve consideration of non-causative factors. However, this was only in exceptional circumstances and (in his view) where there was a close connection between such factors and the causative activity (or omission) which had given rise to the liability to be apportioned. Steel J did not regard it as arguable that the existence or scope of any insurance cover could be material to the issue of apportionment. There was no connection whatsoever between the insurance cover and the alleged causative conduct. Moreover, TAV had expressly disclaimed a suggestion that it would rely on the fact that it was an economically small business in assessing blameworthiness.

The thrust of Total's second argument was that, given the size of the potential liability to be apportioned (over £700 million), even a contribution of just 5% would amount to a sum which, absent extensive insurance cover, TAV was unlikely to be able to pay. Therefore, providing details of TAV's insurance cover would allow the Court to see whether proceeding with the contribution claim was likely to be a waste of Total's money and the Court's time. However, Steel J held that the Court had no jurisdiction to require disclosure of TAV's insurance position. This was because, having regard to the wording of CPR18.1(1), it could not be said that this was a matter "in dispute in the proceedings". Although he was mindful of the overriding objective and in particular the need to manage cases in a manner which would save expense and achieve expedition, Steel J considered that Total's argument would require CPR Part 18 and its accompanying Practice Directive to be rewritten. In reaching this conclusion, Steel J rejected the more liberal interpretation of CPR Part 18 applied by Irwin J in Harcourt v FEF Griffin [2007] EWHC 1500 (QB). In this regard, Steel J noted that certain pre-CPR authorities and a Law Commission paper on Third Parties – Rights Against Insurers had not been drawn to Irwin J's attention in Harcourt.

Comment

The decision by Irwin J in Harcourt was met with some surprise at the time it was made. It appeared to put an insured defendant at a substantial disadvantage in that, where there was concern that he might not be able to satisfy an award from his own resources, he would be obliged to disclose details of his insurance cover. The claimant would then know the defendant's "depth of the pocket" which would no doubt be advantageous for a number of reasons – not least in relation to settlement offers. However, balanced against this was the obvious sense in not allowing an action to continue which would ultimately prove to be fruitless and just a waste of time and money. It was this consideration which led Irwin J to his conclusion in Harcourt.

In this case, Steel J reached his decision on Total's second argument with "some considerable hesitation". This was not just because it was contrary to the view of Irwin J in Harcourt, but also because it was contrary to the strong trend towards a more open approach to litigation. As Steel J recognised, "Albeit the potential for prejudice to the defendant and his insurers must be borne in mind, in the modern age of 'cards on the table' the question is readily posed why should not the one factor which may be key to a claimant's view of the merit of pursuing a claim, namely what is the limit of cover and will the costs eat it up anyway, be known? By the same token, concerns as to the appropriate share of court resources to be allocated to a case ought to include allowance for the prospects of an effective recovering.". Ultimately, though, he was not persuaded that the provisions of the CPR, however liberally interpreted, had led to a significant change in law and practice on this point.

Although strictly speaking Irwin J's decision in Harcourt has not been overruled, it is probable that Steel J's decision will be preferred in the future. This will be welcome news for insureds and insurers alike.