The decision in Riedweg v HCC International Insurance Plc & Anor [2024] EWHC 2805 (Ch) provides critical guidance for insurers on potential contribution claims or recovery actions where there is a claim against them pursuant to the Third Parties (Rights against Insurers) Act 2010 (2010 Act).
Background
The case of Riedweg concerned a professional negligence claim brought by Nicole Marlene Riedweg (the claimant). The claimant alleged that Goldplaza Berkeley Square Ltd (Goldplaza) had negligently overvalued a property she contracted to purchase for £8 million in December 2016. The claimant sought damages for £2.2 million from Goldplaza along with interest and associated losses.
Goldplaza entered voluntary liquidation on 4 November 2021, and so the claimant pursued her claim against Goldplaza’s professional indemnity insurer, pursuant to the 2010 Act.
The insurer sought permission to issue a Part 20 claim against the solicitors who had acted for the claimant in the property purchase, and another, alleging that they were liable to the claimant for the same damage as Goldplaza under the Civil Liability (Contribution) Act 1978 (1978 Act).
The key question that arose was whether the insurer’s liability to the claimant and the solicitor’s potential liabilities to the claimant were the ‘same damage’ for the purposes of section 1(1) of the Contribution Act. The solicitors argued that the insurer's liability to indemnify under the policy was not the same as the damage caused by the insured's negligence. They contended that the 2010 Act provided a procedural mechanism for claimants to pursue insurers directly but did not make the insurer liable for the 'same damage' as its insured, for the purposes of bringing a contribution claim under the 1978 Act.
Court's Decision
The Court agreed with the solicitors and dismissed HCC's application for permission to pursue the Part 20 claim. The court held that the damage for which HCC might be liable as an insurer is not the same as the damage caused by the solicitor. This was despite the fact that it was agreed by all parties that Goldplaza, if solvent, would have been able to bring contribution proceedings itself.
The court noted that the 2010 Act provides a procedural mechanism for claimants to pursue insurers directly but does not alter the nature of the insurer's liability to the claimant.
Commentary
This decision is significant for insurers as it clarifies the limitations on their ability to pursue contribution claims under the 1978 Act and the scope of their liability and the 2010 Act.
Importantly, the court noted that if insurers had paid out under Goldplaza's policy, they would have become subrogated to Goldplaza's rights. This means that while insurers may not pursue contribution claims directly under the 1978 Act, they retain the right to step into the shoes of the insured and pursue recovery actions against third parties responsible for the insured's loss through subrogation. However, this does not take into account the fact that the 2010 Act allows claimants to claim (and insurers to dispute) both liability (of the insolvent insured) and coverage under the policy at the same time.
Although this decision is not surprising given the wording and the overall purpose of the 2010 Act, it demonstrates yet more practical and legal difficulties for insurers when they are a defendant to a 2010 Act claim.
For further information on the 2010 Act generally see our Law-Now.
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