There is an increasing tendency on the part of Pursuers to raise litigation directly against insurers in terms of the European Community (Rights against Insurers) Regulations 2002. Those Regulations create the right for a Pursuer to sue an insurer directly in place of an “at fault” insured.
Where a driver is uninsured, it is clear that the Regulations cannot apply and the insurer of the vehicle may require to act as Road Traffic Act insurer and satisfy an unsatisfied judgement against the uninsured driver.
But what of the situation where the driver of a vehicle is insured but in default of his policy terms and conditions? The insurer is contractually entitled to decline indemnity to the defaulting insured and often advises a Pursuer’s representative that they are only acting as RTA insurer and asks for an unsatisfied judgement to be obtained. However, often the court action is then raised against the insurer.
The terms of the Regulations are unclear as to whether action against an insurer direct is competent where the insured has breached the policy but, on balance, we think that the court would find that it is indeed competent to sue the insurers where a driver was covered by a policy of insurance at the time of an accident, but has breached the contractual terms of the policy.
In those circumstances, it seems pointless for insurers to wait for a judgement to be taken against themselves before settling the claim under the Road Traffic Act. It makes much more sense to ignore the Act and to proceed to settle the court action against the insurer on best terms available. The right of recovery against the defaulting insured that would normally be provided by the Act should be found in the contractual provisions of the policy itself and it should be the policy breach that is relied upon in any subsequent proceedings to seek reimbursement from the insured. This prevents any unnecessary judgements being issued against the insurers and avoids any adverse effect that these judgements could have on an insurer’s credit rating.
Contact:
Stephen Bryceland