Is an insurer responsible for 'the same damage' as its insured?

A recent High Court decision, in Riedweg v HCC International Insurance Plc & Anor [2024] EWHC 2805 (Ch), offers welcome clarity on the law surrounding an insurer’s liability under the Third Parties (Rights Against Insurers) Act 2010 (2010 Act) and its ability to share that liability, by way of contribution proceedings, under the Civil Liability (Contribution) Act 1978 (1978 Act). The case underscores the complexities of the two acts and the way in which they interact, especially in cases of negligence.

Background facts

The claimant intended to purchase a property based on a valuation prepared by Goldplaza Berkeley Square Ltd, trading as Ian Scott International (Goldplaza). The claimant brought a claim against Goldplaza, alleging that the property was overvalued.  Due to Goldplaza's insolvency, the claimant brought a claim directly against Goldplaza’s indemnity insurer, HCC International Insurance Plc (HCC), pursuant to the 2010 Act.  The relevant provisions of the 2010 Act are as follows:

"1(1) This section applies if—

(a) a relevant person [ie Goldplaza] incurs a liability against which that person is insured under a contract of insurance, or

(b) a person who is subject to such a liability becomes a relevant person.

(2) The rights of the relevant person under the contract against the insurer in respect of the liability are transferred to and vest in the person to whom the liability is or was incurred (the "third party") [ie the claimant].

(3) The third party may bring proceedings to enforce the rights against the insurer [ie HCC] without having established the relevant person's liability; but the third party may not enforce those rights without having established that liability".

HCC then applied to bring a Part 20 claim against the claimant’s solicitors (the Respondent Solicitors) and another (together the Respondents) alleging that they had both contributed to the losses the claimant now sought to recover from HCC. HCC contends that the Respondents are responsible for the 'same damage’ pursuant to section 1(1) of the 1978 Act:

"1(1) Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)" [our emphasis].

The arguments

The Court was asked to determine whether HCC, as Goldplaza’s insurer, could claim a contribution from the Respondents pursuant to the 1978 Act. To establish the 'same damage', there must be shared liability to the same claimant, not merely overlapping damages arising from separate duties (see Birse Construction Ltd v Haiste Ltd [1996] 1 WLR 675 and Royal Brompton Hospital NHS Trust v Hammond [2002] 1 WLR 1397). The key question that arose, therefore, was whether Goldplaza’s and the Respondents’ potential liabilities were the ‘same damage’ for the purposes of section 1(1) of the 1978 Act. It was common ground that Goldplaza, if solvent, would have been able to bring contribution proceedings.

The Respondent Solicitors argued that HCC's liability, if proven, would stem from its contractual obligation to indemnify Goldplaza under the terms of a professional indemnity insurance policy. Conversely, the Respondent Solicitors' liability, if any (which was denied), would stem from breaches of tortious duty. 

The Respondent Solicitors argued that the 2010 Act simply transfers from an insured to a claimant the right to claim under a contract of insurance; it does not place the insurer in the role of the insured.  The 2010 Act does not make HCC liable for the 'same damage' as its insured, for the purposes of bringing a contribution claim under the 1978 Act.

The decision

In dismissing HCC's application, Master Brightwell accepted the Respondent Solicitors' submission. While the insurer's obligation was to indemnify Goldplaza, the Respondents’ liability would be rooted in different causes of action.  The liabilities of HCC and the Respondents were not, therefore, the ‘same damage’ under the 1978 Act. 

Comment

The 2010 Act does not equate insurers with their insured for contribution purposes.  The insurer does not become liable to a claimant (the ‘third party’) because it also caused the relevant damage, but because it is required to indemnify its insured as a matter of contract.  The 2010 Act simply provides the mechanism for a claimant to recover direct from that insurer the losses caused by its now insolvent insured, without first having to prove the insured's liability and make the insured insolvent (as was the case under the Third Parties (Rights against Insurers) Act 1930).  The insured and the insurers' liabilities are not the 'same damage' for the purposes of the 1978 Act.

Some commentators may say, as HCC argued in this case, that this is a lacuna in the 2010 Act which ought to be addressed. Otherwise, insurers are not going to be able to pursue contribution claims that their insureds would, if solvent, be able to bring. Given the potential importance of this point, we anticipate this decision may be subject to appeal.

Will Sefton and Richard Seymour were instructed by the Respondent Solicitors.