Liability Insurance Print this TABLE OF CONTENTS SERIAL NO.

1 2 3 4 5 6 7 8 9 TITLE TABLE OF CASES TABLE OF STATUTES INTRODUCTION RESEARCH METHODOLOGY CHAPTER 1 CHAPTER 2 CHAPTER 3 CONCLUSION BIBLIOGRAPHY PAGE NO. 2 2 3 4 6 13 18 20 21

TABLE OF CASES 1. Barrett Bros Taxis (Ltd) v. Davies, (1966) 1 WLR 1340. 2. Bradley v.Eagle Star Insurance Co. Ltd, (1989) A.C. 957. 3. Forney v. Dominion Insurance Co ltd, (1969) 1 W.L.R. 928. 4. Fraser v. Furman, (1967) 1 W.L.R. 898. 5. Gray v. Barr, (1971) 2 Q.B. 554. 6. Groom v. Cracker (1939) I KB 194. 7. Marcel Beller v. Hayden (1978) Q.B. 694. 8. Pioneer Concrete (U.K.) Ltd v. National Employers Mutual General Association (1985) 1 Llyods Rep. I.R. 178. 9. Post Office v. Norwich Union Fire Insurance Co, (1967) 2 Q.B. 363. 10. Soole v. Royal Insurance Co, (1971) 2 Lloyds Rep. 332. 11. Thorman v. Hampshire Insurance, (1988) 1 Lloyds Rep 7. 12. Woolfall & Rimmer v. Moyle, (1942) 1 K.B. 66. 13. Hardy v. Motor Insurers Bureau, (1964) 2 Q.B. 745. 14. Tinline v. White Cross Insurance Association, (1921) 3 K.B. 327. 15. Petrofina Ltd v. Magnaload Ltd, (1984) 1 Q.B. 127. 16. Williams v. Baltic Insurance Association of London, (1924) 2 K.B. 282. TABLE OF STATUTES 1. Third Parties (Rights against Insurers) Act, 1930. 2. Road Traffic Act 1988. INTRODUCTION

Ins.

Its a cardinal principle of law based upon public policy that a person cannot be indemnified against his own wrongful acts. There is a species of insurance which tends to indemnify the assured against the consequences of his wrongful act, so far as third persons are concerned; and in such contracts it is necessary to prove the commission of such act and further the assured is responsible for such wrongful act. In the absence of such proof the liability of the insurers do not arise. Such issues are dealt with under the concept of liability insurance under the laws of insurance. Such an insurance can be against liability for accidents arising in connection with the use of motor vehicles, or against liability to the public by the owners of the business and employers liability insurance. Professional men, such as solicitors and doctors, may also insure against liabilities which maybe incurred in the course of their practice. However, the third party who is affected does not have complete rights over the claim and in this research paper we will see the status of a third party victim in such liability insurances. Further there does not exist complete liability upon the insurer as well as the insured, through various terms and conditions in a liability insurance they can manipulate their positions. Thus in this paper besides discussing the law on the point, the researcher has dealt separately with the rights and duties of the insurer, the insured and the third party. RESEARCH METHODOLOGY AIMS AND OBJECTIVES: The aim of this project is to understand the concept of liability insurance under insurance laws. Further, the paper attempts to discuss the third party rights with regard to a liability insurance policy. RESEARCH QUESTIONS: What is a liability insurance policy? What are the third party rights under such an insurance? When and how can a third party make a claim? What are the standard terms and conditions of a liability insurance policy? What are the rights and duties of an insurer under such a policy? What are the obligations put upon an insured under such a policy? SCOPE AND LIMITATIONS: The scope of this project is to understand the concept of a third party form and what is the status of the insurer, insured and the third party under such a liability insurance policy. Due to the lack of development of this field of insurance in India, the researcher has not been able to rely on Indian case law on the point. METHOD OF WRITING: The researcher has used both a descriptive and analytical method of writing in order to understand the issues involved in this subject better. Also the researcher has taken the help of judicial decisions in reiterating her views on the subject. MODE OF CITATION: A uniform mode of citation has been followed throughout this project.

SOURCES OF DATA : The researcher has used secondary sources in order to obtain sufficient data for this project, namely, books, articles and the internet. CHAPTERISATION: Chapter 1: This chapter deals with the meaning of liability insurance and the rights of third parties affected by the acts of the insured. Chapter 2: This chapter deals with the terms of a standard contract as laid out by an insurer and it also gauges the rights and duties of an insurer giving a liability insurance policy. Chapter 3: in this chapter the rights and obligations of the insured is laid down and what is the standard of care that he needs to maintain. CHAPTER 1 LIABILITY INSURANCE AND THIRD PARTY RIGHTS An IntroductionLiability insurance is not an accident insurance, or automatic payment for all accidents which cause damage. Rather, it defends the insureds when claims are made against them and settles with the claimants on reasonable terms if the insured s are legally liable for the loss. The liability insurance policy makes such payments as the insureds would themselves have been obliged to pay as it is usually expressed as providing indemnity against liability at law.[1] Though such a phrase leans towards negligence liability, yet it is not so confined. In Wimpey Construction v. Poole,[2]the court held that insurers were liable to indemnify a building contractor who had incurred liability to a third party for the faulty design of a structure even though the fault did not amount to negligence. Thought there may not be an obligation to pay in the absence of negligence, the insurer, however, is obligated to defend the insureds against groundless claims, to bear the expenses thereof, and to make settlements subject to the limits of the policy in case of an unfavourable decision. In the case of liability insurance, the third party who is injured or suffers a loss is not the insured. Due to this, liability insurance has sometimes been termed as third-party forms.[3] Types of liability policy: Liability insurance comprises of the following class mainly: 1. Public Liability insurance, e.g. insurance in respect of liabilities connected with particular buildings, motor vehicles and machinery. 2. Employers liability insurance.[4] Further, the same policy may combine several insurances either for convenience sake or to fully protect the assured. Thus, a motor accident may cause damage to the vehicle and personal injury to its owner, and may at the same time involve him in liability to third persons.[5] Liability policies generally fall within two classes. First, the policy may protect the assured against all losses occurring during the currency of the policy. Here the insurer accepts liability for causes of action against the insured which may have arisen prior to the inception of the policy but gives rise to damages and award during the term of the policy.[6] The

second class imposes liability on the insurer for any event occurring or notified during the period of the policy.[7] The Liability covered: The main purpose of the policy is to permit the assured to recover for negligence, the policy thus presumes that there will have been some misconduct on the insureds part. Thus, in the absence of any express provisions restricting the insurers liability, the insured will be able to recover provided his liability is not due to an intentional criminal act on his part.[8] However the mere fact of criminality is not sufficient to prevent recovery, and while it is against public policy, the courts have often said that the true beneficiary of a liability policy is a third party victim, and have thus in certain exceptional cases allowed the assured to recover despite the criminal nature of his conduct.[9] Express clauses may limit the insurers obligation in the event of the insureds misconduct, although the courts have often limited this exclusion to deliberate criminal misconduct.[10] For instance, where a policy requires the assured to take reasonable precautions against the incurring of liability, nothing short of recklessness will bring the exception into play. Liability policies normally cover only legal liability and will not, for example, provide cover for ex gratiapayments by the assured.[11] Third Party Rights: Right to indemnity: As mentioned previously, an insurance against liability, like an insurance on property is a contract of indemnity,[12] and no obligation arises on the part of the insurer to pay a claim until the assured has suffered a loss. Thus what we see is that the liability of the insurers to the person injured by the acts of the assured arises out of contract of insurance, and is not independent in anyway. For example if there exists a valid motor car accident policy, the liability of the assured for his own or his servants negligence is shifted to the insurance company.[13] Third party in no better position than the assured: The third party can be in no better position that the assured. The Act transfers to him the rights of the assured under the contract of insurance. The determination of those rights requires the application of all the terms of the contract and the consideration of any defence which would have been available to the insurers against the insured.[14] Accrual of cause of action: The insureds rights are actually transferred to the third party only when a liability is incurred by the insured, and a liability is not incurred unless the fact and extent of the liability of the party seeking to enforce the indemnity has been ascertained through proceedings or otherwise.[15] After much discussion this view was ultimately accepted and several court decisions supported this. In Post Officev. Norwich Union Fire Insurance Co,[16] the insureds were contractors engaged in road works. In the course of their excavations they destroyed a cable belonging to the Post Office. The latter claimed that this was the fault of the contractors, though this was denied, the contractors claiming that it was the fault of a post Office engineer. The contractors having gone into liquidation, the Post Office sued their insurers under the English Act of 1930, before the assureds liability was established.

It was held that the action was premature. The third party gets no better rights than the assured, and the latters rights arise only when his liability to the third party has been determined or agreed.[17] This decision was followed and upheld by the House of Lords in Bradley v.Eagle Star Insurance Co. Ltd.[18] While the decision in the two above cases cannot be faulted, they are nonetheless somewhat artificial as almost inevitably in such cases the insurers will in practice be the real defendant and, once the insureds liability is established, will normally immediately satisfy it. Third Party risks and insurable interest: In English law under the Third Parties (Right against Insurers) Act, 1930, there exists a statutory assignment of the rights of the assured to the injured party. Thus if an insured has a liability insurance contract, and subsequently goes bankrupt or makes a composition with his creditors, or if a winding-up order is made and a receiver is appointed to take hold of the possessions on behalf of the debenture-holders, etc, then in such a case any right of the insured against the insurer will be transferred to the third [arty to whom the liability was incurred. The issues that sometimes arise are when a limited owner or someone without insurable interest in particular property, can recover on an insurance policy for the benefit of a third party, and when such a third party may be able to make a direct claim on the property. If the insured has a limited interest in the goods insured, but has insured them for the full value, he can recover a full value upon the loss, holding the balance as trust for the third party.[19] Traditionally this was not allowed however in English law with development of case law and statute the position has changed considerably. In Williams v. Baltic Insurance Association of London[20], the court held that the motor vehicle policy in this case was essentially an insurance on goods, that is the motor car and incidentally against the third party risk, hence if the insured had insurable interest in the motor car he was entitled to recover and the insurers were liable to pay the insured, as a trustee in this case. Further, if the construction of the contract is such that there is a waiver of insurable interest, then the assured can claim on behalf of his sister as a trustee. These cases of third party liability arises in a bailee- bailor relationship as well as those between a contractor and his sub-contractors. In Petrofina Ltd v. Magnaload Ltd,[21] it was held that an insurance effected by the owners and main contractors covering the construction of an extension to an oil refinery, under which all the sub-contractors working on the site were included within the definition of the insured, insured to the benefit of each and every sub-contractor in respect of all the property insured. It is important to note that parties to a contract can exclude the operation of the Act, and it is possible that the insurers insert an exclusion. However, subject to that the third party can enforce a contract term that confers a benefit on him if either, the contract expressly provides that he may or if the term purports to confer on him a benefit.[22] Another important situation is where the assured will sometimes be liable to more than one person. And if the claim is not enough to satisfy both then the first party to obtain judgment against the insurer will be entitled to the award of the judgment.[23]

Having had a basic understanding of liability insurance and the position of the affected party who can claim under this policy, let us now see the position of the insurance company under a liability policy. CHAPTER II LIABILITIES AND DUTIES OF AN INSURER All parties to a contract wish to lay down the terms and conditions that would suit their situation best and which would put them at an advantage. There are basically two common form conditions of relevance. First is the admissions of liability and the conduct of proceedings, which would be of concern to the insurer, and secondly, the obligation of the insured to take reasonable care and precaution.[24] Control of proceedings- duty of insurer: Insurers cannot make use of their ordinary rights of subrogation to contest the assureds liability as against a third party unless they first pay the assured the full amount of his loss.[25] Thus the policy usually reserves their rights to conduct litigation in connection with the assureds liability. Such a clause contains two elements, that prohibiting unauthorized admissions of liability and that giving the insurer the right to control proceedings against the insured. As regards the latter usually a standard term is worded such giving the insurer absolute discretion. However in reality this discretion is controlled in that a term would say the insurers have the right to decide upon the proper tactics to pursue in the conduct of action, provided that they do so in what they bona fide consider to be the common interest of themselves and the assured.[26] In Groom v. Crocker[27], a blatant ignoring of the interest of the assured occurred. In this case without foundation and knowing of its inaccuracy, the solicitors acting for the insurers admitted to the third party claimant that the insured had been negligent. This was held to be a clear breach of duty and the insured was entitled to damages for breach of contract and to damages in tort for libel. This view was not followed strictly, however after much debate it was accepted in law that the insurer can settle with the third party so long as they do not unjustifiably admit liability, and, possibly, so long as they do not unjustifiably settle beyond the policy limits or refuse a settlement offer by a third party within these limits.[28] Conduct of proceedings: If the insurers take it upon themselves to carry out defence of action brought against the assured and appoint solicitors for that purpose, then these solicitors are solicitors of the assured, and the assured is entitled to the documents for inspection. Both the insurers and the solicitors by them owe a duty to the assured to conduct the proceedings with due regard to his interests, and an action for damages will lie for breach of that duty.[29] No estoppel If an insurer takes control of proceedings under the standard condition, it is not prevented from subsequently denying liability to indemnify the insured. This may arise because of a non-disclosure or a breach of warranty or condition by the insured discovered only at a later date. If, however the insurer does discover such a right to avoid liability, it will be deemed to have waived its rights if it continues to act for the insured.[30]

Another situation where the insurer can avoid liability is by saying that the event was not within the policy cover. The question here is whether the mere fact that it conducted the defence is sufficient ground for holding that it cannot subsequently deny liability. The only possible legal basis for such a conclusion would be the doctrine of estoppel.[31] The position in this regard is different under the U.S. law and the English law. In Soole v. Royal Insurance Co,[32] the court held that such an estoppel would not apply. This case disregarded the U.S. position which subscribed to an idea of automatic estoppel, where as in the Soole case the court said that the application of estoppel must fulfill certain requirements, namely (i) a clear representation by word or conduct of a present fact, (ii) made to someone who is expected to act on it, and (iii) who does so, to his detriment.[33] Non- waiver agreement: Insurers have a reasonable time in which to make up their minds concerning a claim and they have an opportunity to record their decision to reserve the right under the policy while conducting the assureds defence. Notice to the insurers: A liability often contains a term which requires the assured to give written notice within a particular time of any accident likely to give rise to a claim, and of all claims and legal proceedings brought against him. Such a term is usually expressed as a condition precedent to the insurers liability to make payment.[34] If such a clause is a condition precedent, then non-compliance in such a case gives the insurer a defence to make good the claim in respect of which a notice ought to have been discharged. [35] In some situations the court has held that the insurer who has waived the compliance cannot rely on breach of policy condition to defeat the assureds claim unless they were prejudiced by it.[36] However, if the clause is not a condition precedent to liability, failure to give notice would only preclude a claim in the case of a serious breach.[37] Admission of Liability: There usually exists in a liability insurance policy a condition avoiding the policy in the event of any admission of liability or other conduct by the insured to the prejudice of the insurers interest. However breach of such a condition is waived if the solicitor conducting the defence for the insurers, with knowledge of the breach, elects to continue to defend the action.[38] Such a condition is obviously important to the insurers as it is a means to protect their interest and is a perfectly valid condition as well. The problem that arises here however is that this standard condition has a large sweep and the fact that the insurer can rely on a casual admittance of liability by the assured to the third party, to avoid liability despite any real prejudice to their position, seems slightly harsh.[39] Costs and sums incurred: Usually every policy would have terms as regards costs. However, if no express provision is made as to costs in the policy, they may be recoverable under the general indemnity clause, subject to the usual rules about mitigation. Liability insurance commonly covers the costs of the insureds defending the claim; the extent of cover is a matter of interpretation, particularly if the cover is limited to costs incurred with the consent of the insurer.[40] Limitation on Insurers total liability:

A liability policy would usually provide that the total liability, either in respect of damages recovered or costs, shall in no event exceed a particular sum. Such a provision will be construed strictly as it may adversely affect the assured.[41] The sum insured which is insured can be limited in different ways.[42] For instance a policy may have a limit applying to any one contractual period, regardless of the number of claims made. Another limitation often found in liability policies is that a certain maximum sum will be paid in respect of any one accident or any one occurrence. This is problematic in the sense that if the limit is expressed per occurrence, then it seems that the number of occurrences is the number of times the insured is negligent. If there is only one negligent act, there is only one occurrence and the policy will apply regardless of how many individual claims may be made by the third party as a result. This was discussed and stated in Forney v. Dominion Insurance Co ltd.[43] CHAPTER III INSURED AND DUTY OF REASONABLE CARE Obligation to take reasonable precaution: section 1 Another standard condition in the policy is one requiring the insured to take reasonable care or precaution to avoid loss. Such a clause read literally would negate a large part of the cover intended to be effected. One of the main purposes of a liability policy is to insure the assured against liability in negligence, which essentially means where there is failure to take reasonable care when a duty to care is owned. Thus the courts have taken a common sense construction of this condition. The above was discussed by the Court of Appeal in Woolfall & Rimmer v. Moyle,[44] here the insured employer was vicariously liable for the acts of a foreman who had failed to ensure that certain scaffolding was safe. The court rejected the insurers argument that the insured had therefore failed to take reasonable care. The insured had complied with that condition by selecting a competent foreman and reasonably delegating to him certain tasks. Further the court said that the effect of the clause in the policy was to impose a personal obligation on the assured to conduct his business in an ordinary prudent manner and not in a way that invites accidents. Requirement of recklessness: In subsequent cases the courts held that the precaution taken need not only be reasonable ones. InFraser v. Furman,[45]the court held that only recklessness or worse on the part of the insured will amount to a breach of the condition. Reasonable care does not mean reasonable as between the insured and the third party, but as between insurer and insured having regard to the commercial purpose of the contract, which includes indemnity against the insureds own negligence.[46] Another term that may exist is that the assured will at all times exercise reasonable care in seeing that all reasonable safeguards against accident are provided and used.[47] Liability in the course of business: The policy usually contains the nature and scope of the assureds business and this is read as part of the policy. If the assureds business is inaccurately described in the policy but the agent knows the real nature of the business, the insurer may then be deemed to have had the agents knowledge and to have insured the employer in respect of his actual business as known to the agent, and not merely in respect of the business described in the policy.[48]

Similar to cases of construction work,[49] professional indemnity policies may undertake to indemnify the assured for negligence while acting in the course of his profession. For instance, a solicitor who commits champerty has been held not to be acting in the course of his profession and is therefore unable to recover. Conversely, some household policies provide cover against liability for accidents excluding liability arising from trade or business. This exclusion relates to liability incurred whilst acting in the course of an occupation, but to one arising outside the occupation from the use of skills derived from the assureds work.[50] Thus what we see is that though the insured has a right to claim from the insurance company in order to pay off the victim who has a right over the claim, yet the insured must also act responsibly in trying to avoid liability to a third party, thus it is a two way process. CONCLUSION Liability insurance provides cover against depletion of the insureds assets caused by his liability in law to others. This contract between the insurer and the insured benefits a third party who has been affected by the acts of the insured. Though the concept of privity of contract has always existed in law, yet in such circumstances where if the parties are not made liable to the third party, it would have no further recourse and would be unjust. Under such a policy the right of being compensated does not fall immediately to the third party. First of all the liability has to be established under the law. This provides a safeguard, in the sense that it helps avoid meaningless or baseless claims. However, though such an insurance protects the insured against liability caused by a negligent act, yet it does not protect the insured in cases where loss is due to an intentional criminal act on his part. This follows from the legal maxim that no person can benefit from his own wrong. Though it may therefore seem that a liability insurance has a wide sweep and would protect the insured for his actions, yet the law lays down a limitation on these rights. Further, to avoid false claims on behalf of the insured, the insurer may require a clause in the policy which demands a reasonable standard of care on the part of the insured and thus if he has not taken the necessary safeguards then the insurer gets a defence against the insured. Therefore what we see is that a liability insurance policy is very useful in that it protects third parties who have incurred loss due to someone else. This is required because there maybe situations where the defendant may not be insured and thus the third party will only have a right through tort, this may take time and have an adverse effect upon the third party who would have suffered immense loss. Thus to solve such problems in the recent years there has come about a Motor Insurance Bureau (MIB) which helps third parties to claim from them in case of an uninsured party. This has been very successful under motor vehicle policies and can perhaps be replicated in other areas of liability insurance. BIBLIOGRAPHY BOOKS: 1. David L. Bickelnaupt, General Insurance, 10th ed ( USA; Richard D. Irwin, Inc, 1979). 2. Dr. Avtar Singh, M N Srinivasans Principles of Insurance law, 7th ed ( Nagpur; Wadhwa & Co, 2002). 3. E.R. Hardy Ivamy, General Principles of Insurance Laws, 6th ed ( London; Butterworths, 1993).

4. John Birds & Norma J. Hird, Birds Modern Insurance law, 6th ed ( London; Sweet & Maxwell, 2004). 5. K.S.N Murthy & Dr. KVS Sarma, Modern Law of Insurance in India, 4th ed ( New Delhi; Lexis Nexis Butterworths, 2002). 6. Malcolm A. Clarke, The Law of Insurance Contracts ( London; Lloyds of London Press Ltd., 1989). 7. Nicholas Legh- Jones (ed), MacGillivray on Insurance law, 10th ed ( London; Sweet & Maxwell, 2003). 8. Robert I. Mehr & Emerson Cammack, Principles of Insurance, 7th ed ( USA; Richard D. Irwin, Inc, 1980). 9. Robert Merkin (ed), Commacks law of Insurance, 6th ed (London; Sweet & Maxwell, 1990). [1] David L. Bickelnaupt, General Insurance, 10th ed ( USA; Richard D. Irwin, Inc, 1979) at 588. [2] (1984) 2 Llyods Rep 499. Cf, Robert Merkin (ed), Commacks law of Insurance, 6th ed (London; Sweet & Maxwell, 1990) at 324. [3] Robert I. Mehr & Emerson Cammack, Principles of Insurance, 7th ed ( USA; Richard D. Irwin, Inc, 1980) at 284. [4] E.R. Hardy Ivamy, General Principles of Insurance Laws, 6th ed ( London; Butterworths, 1993) at 8. [5] Ivamy, at 8. [6] Here the insurer will prior to the making of the contract will require disclosure of any events known to the assured and likely to give rise to a claim during the currency of the policy. [7] In such a policy the fact that damages are not awarded against the insured until after the policy has run off is immaterial. In Thorman v. Hampshire Insurance, (1988) 1 Lloyds Rep 7, the Court of Appeal held that issue of a writ against the assured rather than its subsequent service, is the notifiable occurance and that it is immaterial that the claims under the writ as issued are not particularized until some later date. [8] Supra note 2, at 325. [9] Gray v. Barr, (1971) 2 Q.B. 554. [10] Marcel Beller v. Hayden (1978) Q.B. 694. facts- in this case the employer took a keyman insurance policy. Loss occurred while the insured was driving in a drunk and state and died. There was an exclusion clause in the policy which provided that, if death occurs during the doing of a criminal act the insurer wont be liable. On the basis of this clause the employer was not able to claim the policy money. [11] Supra note 2, at 324. [12] MacGillivray says that this does not mean that third parties cannot acquire rights under the policy if they also possess rights in the subject-matter of the insurance. Nicholas LeghJones (ed), MacGillivray on Insurance law, 10th ed ( London; Sweet & Maxwell, 2003), at 347. In Hardy v. Motor Insurers Bureau (1964) 2 Q.B. 745, a similar question arose. In this case a security officer tried to stop the driver of a van who was bearing a stolen road fund licence. The officer was injured when the driver drove off while the officer was still holding onto the open door of the van, this amounted to an intentional criminal act. The van driver was uninsured. The plaintiff obtained a judgment against him for 300 and then sued Motor

Insurers Bureau for that amount. To succeed in his claim he had to establish that the drivers liability towards him was one which had to be covered by a policy insurance under S.145 of the Road Traffic Act 1988. The Court of Appeal held that it was. Although an assured who deliberately injured a pedestrian could not himself recover an indemnity in respect of that liability from his insurers, the disability attaching to him by reason of the maxim ex turpi causa non oritur action did not extend to a plaintiff exercising his statutory to sue them under S.151. what the Act did was not to effect a statutory assignment of the assureds right under the contract of insurance, but to confer on third party who suffers bodily injury as a result of the tortuous act of the assured, and obtains a judgment against him, a direct right of action against the insurers. Supra note 12, at 348. [13] Legality of this issue was discussed first time in Tinline v. White Cross Insurance Association, (1921) 3 K.B. 327. facts- here the assured was entitled to be indemnified against sums which he should legally be entitled to pay to third parties as compensation for accidental personal injury caused through driving of his motor car. While driving his car at an excessive speed the assured knocked down three persons injuring two and killing one, and in respect of this occurrence he was convicted of manslaughter on his own confession. Actions were commenced against him by the injured persons and by the representatives of the person who was killed, for damages. The assured sued the insurance company for a declaration that he was entitled to be indemnified in respect of those claims. It was held that the policy protected the assured against the civil consequences of the accident due to negligence, whether slight or great, and that a policy covering risks of this nature was not void against public policy. [14] Supra note 12, at 830. Further where the insurer has the right to acquire the assured not to admit liability, the third party is equally bound by a term to that effect. A clause making it a condition precedent to liability that any claim form or notice of proceedings should be sent to the insurer affects the third party as much as the assured, and so does a provision limiting the insurers liability. [15] John Birds & Norma J. Hird, Birds Modern Insurance law, 6th ed ( London; Sweet & Maxwell, 2004) at z352. [16] (1967) 2 Q.B. 363. [17] The correct procedure in this sort of case is for the third party to obtain the leave of the court to bring proceedings against the insolvent insured. Only when these proceedings have been determined can the insurer be liable under the 1930 Act. [18] (1989) A.C. 957. Here the insured had been the company employing the plaintiff, Mrs. Bradley, against which the latter was assumed to have the right to claim damages as a result of her having contracted byssinosis while working in circumstances which involved the inhalation of cotton dust. The company had been dissolved in 1976 and so, there being no other possible defendant , Mrs. Bradley commenced proceedings directly against her employers insurers. It was held that this action had to be struck out as disclosing no cause of action. No liability had been incurred by the insured employer that could bring the Act into operation. [19] The essential requirements here are that the insured has an interest in the goods and that as a matter of construction of the insurance contract, the policy does cover more than the limited interest.Supra note 15, at 61. [20] (1924) 2 K.B. 282. [21] (1984) 1 Q.B. 127. Cf , Supra note 15 at 62.

[22] Supra note 15, at 68. In such a situation there is need to see other methods whereby the third party may be able to make a claim. One is the possibility of an agency principle. If the insured was given actual authority to insure, then he can claim if the agency was disclosed, and this may not be difficult to show where the insurer has a limited interest. However such a scheme is not free from difficulties. [23] Supra note 12, at 832. [24] Supra note 15, at 361. [25] Supra note 2, at 327. [26] Lord Greene in Groom v. Cracker (1939) I KB 194. Cf, Supra note 15, at 361. [27] Id. [28] Ibid, at362. [29] Supra note 12, at 839. [30] Supra note 15, at 363. [31] Supra note 12, at 836. [32] (1971) 2 Lloyds Rep. 332. Facts- the assured purchased a plot of land in Richmond on which one house stood. He decided to increase its value while diminishing the value of the surrounding properties by demolishing the one house and erecting six others. The neighbours fought an application for planning permission but in vain. However, they figured out another way, that is in the assureds title deeds had a covenant restricting the number of houses to one on the assureds land. The assured obtained cover against damage resulting to him from successful enforcement of the covenant in the event of any personclaiming to be entitled to enforce it. The neighbours brought proceedings to enforce the covenant. The insurers conducted the defence and lost. The insurers then disputed liability on the ground that the claim had first been brought before the inception of the policy, and so was not covered by it. The Court held them liable to pay, but also said that, if they had not been, their conduct in defending the assured would not have estopped them from denying liability. That conduct did not amount to an unequivocal representation that they would indemnify the assured regardless, because no insurer, when it takes over the defence of its assured, can be sure that it will be liable in the long run. [33] Supra note 12, at 838. [34] Ibid, at 834. [35] Pioneer Concrete (U.K.) Ltd v. National Employers Mutual General Ins. Association (1985) 1 Llyods Rep. I.R. 178. Facts- There was a clause in a public liability policy which required written notice of any accident or claim or proceedings, and the insured gave notice only of proceedings and not of the occurrence and claim preceding them. This was held to be a breach of the clause and the insurers were relieved from liability to meet the claim. [36] In Barrett Bros Taxis (Ltd) v. Davies (1966) 1 WLR 1340. Cf Supra note 12, at 834., an assured was required to forward to his motor insurers any legal process received with regard to an accident, but failed to do so. The Court of Appeal held that the insurers waived that non-compliance in subsequent correspondence, and that the insurers had received the required information from the police. Further the court said in any event they could rely on breach unless they were prejudiced and in this case since they had been told of the intended prosecution by the police, there was no prejudice. [37] If the breach is not repudiatory of the contract as a whole, insurers would probably need to demonstrate that they had suffered very serious consequences as a result of the lack of timely notice, in order to have a defence to the claim based on late notice. Ibid, at 835. [38] Ibid, at 847.

[39] Of course a case with no prejudice at all seems unlikely, as the insurer could always argue that it might well have persuaded the third party to accept a smaller settlement claim. Ibid, at 364. [40] Malcolm A. Clarke, The Law of Insurance Contracts ( London; Lloyds of London Press Ltd., 1989) at 327. [41] The limitation may affect the assured if, for example, the insurer has the right to defend and does defend a doubtful case with the result that damages and costs are recovered far in excess of the sum insured, although in the first instance the claim might have been settled for a sum which would have been covered by the policy. Supra note 12, at 844. [42] This however does not apply to personal injuries under motor insurance where the statute does not allow it. [43] (1969) 1 W.L.R. 928. Facts- A solicitors professional indemnity policy had a limit of 3000 peroccurrence. His assistant was negligent in advising a client about a cause of action in tort. The matter involved a motor accident when a man driving hegligenty injured some of his family and caused the death of himself and his father-in-law. The survivors, including the deceaseds widow, were advised to sue the drivers estate, which was quite proper, but the assistant failed to issue the writs in time. In addition, she advised the widow to act as the drivers administratrix which was also negligent, because it meant that the widow would effectively lose her damages, not being able to sue in her personal capacity as representing the drivers estate. It was held that the two acts of negligence were two occurrences, and the insurers maximum liability was therefore 6,000. [44] (1942) 1 K.B. 66. [45] (1967) 1 W.L.R. 898. Cf, Supra note 15, at 365. [46] Lord Diplock stated that, the insureds omission or act must be at least reckless, that is to say made with actual recognition that a danger exists, and not caring whether or not it is averted. The purpose of the condition is to ensure that the insured will not, because he is covered against loss by they policy, refrain from taking precautions which he knows ought to be taken. Ibid, at 366. [47] Supra note 12, at 849. [48] Ibid, at 851. [49] A builder who had not previously carried out demolition work took out a policy to indemnify him in respect of the work involved in the demolition of a mill. He was asked in the proposal form whether he used explosives in his business; he answered the question in the negative as he did not use explosives in his business, but he did intend to use explosives for the demolition and it was held that the question related not to his general business as a builder but to the specific business of demolition covered by the policy. Supra note 12, at 850. [50] Id.