Suing an insurer directly? The perils and pitfalls
For anyone undertaking personal injury litigation it is well known that identifying the correct defendant at an early stage is essential. What is less known is the fact that in certain circumstances a claim can be brought directly against insurers in a claim arising out of a road traffic accident under Regulation 3 of the European Communities (Rights against Insurers) Regulations 2002. The fact that the provisions of the regulations are not commonly used or known can lead to mistakes being made.
The regulation can be a useful tool in some circumstances, particularly in actions where the defendant has died. It can avoid the need to undertake expensive and sometimes fruitless investigations to identify a personal representative for the estate of the deceased. (A generic suing of the estate itself is insufficient.) However, a clear understanding of the prevailing conditions is vital to avoid the pitfall which led to the decision in Nemeti and others v Sabre Insurance Company Limited.
This was an appeal against the dismissal of the claimants’ application to substitute the estate of a deceased driver as defendant in place of the insurers of the vehicle involved, who were the original defendant. The claimants were all Romanian nationals residing in the UK. The deceased was also a Romanian who was driving his father’s vehicle. The vehicle was a UK registered vehicle and insured by the respondent insurance company. However the accident occurred in Romania and the deceased driver was not insured to drive the vehicle.
The claimants’ solicitors had throughout the pre-issue investigations liaised with the insurers. Shortly before expiry of the limitation period, they had issued Court proceedings against the insurance company alone under the 2002 regulations. However, on receipt of the Defence it became apparent that the 2002 regulations could not apply in the circumstances of the claim. The claimants found themselves in the Court of Appeal attempting to substitute the estate as the defendant to the action after expiry of the limitation period. The appeal was in the main concerned about the interpretation of Section 35 of the Limitation Act 1980, but it is evident from the judgment that had the 2002 regulations been carefully considered it would have been evident early on that they could not apply to the circumstances of this claim.
Regulation 3 of the European Communities (Rights against Insurers) Regulations 2002 provides that an insurer “shall be directly liable” to an entitled party (i.e. any resident of a member state) if certain conditions are fulfilled. These are:-
- The entitled party has a cause of action arising out of an “accident”. Accident is defined by Regulation 2(1) as meaning an accident on a road or other public place in the United Kingdom; and
- The entitled party has a cause of action against “an insured person in tort”, defined by ss. 2(1) and 2(3) as a person insured under the insurance policy.
In the Nemeti case these conditions were not met. The accident occurred in Romania and the driver was not the insured under the terms of the policy. The claimants ought not to have issued proceedings against the insurers in the first place and in the circumstances a substitution of the correct defendant was not possible. Whilst therefore the regulations are there and can be a useful tool where the personal representatives of an estate cannot be readily identified, it is essential that thought is given as to whether they can be relied upon in the particular circumstances of the claim. If there is any doubt, a party would not be criticised for incurring the cost of investigations to identify an appropriate personal representative to pursue.