Direct actions against foreign insurers in PI claims: the sting in the tail

News | Wed 3rd Jun, 2015

Barristers and solicitors practising in the field of personal injury litigation arising from accidents abroad have, for some time, been comforted by the fact that – at least as far as EU member states are concerned – it is relatively easy to idenitfy a direct cause of action (under the relevant local law) against the tortious party’s insurer, thereby permitting a claim to be brought in the Courts of England and Wales pursuant to EC Regulation 44/2001 and the CJEU decision in FBTO v Odenbreit (2008) Il Pr 12.

However, to what extent can the foreign insurer defend such a claim on the basis that it that its obligation to indemnify its insured under the policy did not extend to the claim made by the injured claimant?

The point arose in the recent decision in Williams v MAPFRE (2015) Lawtel (Chester CC – HHJ Halbert). The Claimant suffered injuries when a deckchair collapsed beneath her at a Spanish hotel. She sued the Spanish hotel’s insurers directly under Article 76 of the Spanish Insurance Contracts Act 1980, which provided for an injured person to have a direct action against the insurer to demand that the latter fulfil its obligation to compensate. The question arose as to whether the direct cause of action conferred by the Spanish legislation was created by transferring the hotel’s tortious liability to the insurer (in which case there could be no doubt that the claimant could pursue the Defendant), or whether it was a statutory provision granting the Claimant direct access to the indemnity available to the hotel under the insurance policy. If it was the latter, it was common ground that whilst art.76 prevented the insurer from relying as against the Claimant on exemption clauses in the insurance contract which it would be able to rely on as against the hotel, such prevention did not apply to clauses which defined the scope of the indemnity. This was important because the policy only provided coverage for claims submitted within Spain, not England.

The Court held that the correct construction of the Spanish legislation was that it was intended to give the Claimant direct access to the insurance indemnity owed to the hotel and not to create an independent statutory liability. It followed that the statutory liability was governed by all the terms of the policy, except exemption clauses. The result was that since the insurer would not be liable to indemnify the hotel (because the claim had not been brought in Spain), the Claimant had no cause of action against the insurer in the English courts. The Court rejected the Claimant’s argument that this outcome was in any way inconsistent with the CJEU’s decision in FBTO v Odenbreit, since the Court in that case had expressly held that the right to sue the insurer in the Claimant’s home country was expressly subject to the existence of a valid direct right of action under the applicable foreign law.

The implications of this case in direct claims pursued against Spanish insurers arising out of accidents at hotels are potentially significant, although everything will depend upon the scope of the indemnity under the relevant insurance policy. It is important to appreciate, however, as the court itself recognised, that the Defendant’s argument would not have succeeded in a Road Traffic Claim, since the codified Motor Insurance directive (EC 2009/103) requires Member States to ensure that all insurance policies covering civil liability will respond to claims made in any of the member states.