Authored by Donald Dinnie.
In this UK High Court judgment, an insurer was permitted to join as a defendant in proceedings brought against its insured so it could argue liability issues with the claimant. The court’s findings would impact the scope of insurance cover afforded to the insured by the insurer in respect of claims made against it.
There was a coverage dispute between the insured and insurer under the professional indemnity policy. The dispute arose in the not uncommon situation where the interests of the insured and insurer diverge in relation to liability and coverage.
The insurer wanted the court to determine whether its insured defendant owed the claimant, a litigation funder, a free-standing duty in delict.
A potential conflict of interest existed in the sense that if the litigation funder claimant succeeded in issues against the insured, then it was in the insured’s interest for the issues to include a finding that a delictual duty existed so that it was, in turn, entitled to an indemnity under its insurance policy. It was in the insurer’s interest for the litigation funder claimant to fail because the insurer would then likely have no obligation to indemnify its insured under the relevant policy. The insurer was concerned that its insured would not put up a proper defence
The court, referring to existing authority, affirmed that in appropriate cases insurers may be added to liability proceedings to allow them to make submissions why the claim should fail against its policyholder.
It was desirable that the insurer be joined because the relevant delictual duty issue would otherwise not be contested in the proceedings.
The application by the insurer to join as a defendant was unusual but merited on the facts and legal issues to be determined. An insurer would, on the same basis, be able to successfully join as an interested-party defendant in South Africa.
Managed Legal Solutions Ltd v Hanison (trading as Fortitude Law)