May 18, 2015

Motor Insurance - Ram v Motor & General Insurance (Privy Council)

Privy Council confirms that insurer does not have to organise proportionate payment of claims where limit under policy is reached

The claimant is the administratrix of the estate of a passenger killed in a road traffic accident. The driver's insurers paid out claims from several other third parties. When the claim was made by the claimant to the insurers, she was informed that the policy limit of US$1 million had already been reached and hence they had discharged their liability both under the policy and under the relevant statute in Trinidad and Tobago relating to compulsory motor insurance ("the Act"). The claimant sought to argue that the insurers should have ascertained the total number of claims arising from the event and, given that that total exceeded the policy limit, should have devised a scheme for the proportionate payment of the claims. The insurers sought to rely on Cox v Bankside Members [1995], in which it was held that, where an insurer has a limited fund to meet the claims of multiple claimants, it is legitimate to pay the claims in chronological order until the insurance is exhausted.

The Privy Council has now found in favour of the insurers. Reference was made to Teal v WR Berkley, in which it was confirmed that an insurer must pay out third party claims in chronological order of their ascertainment against the insured. There was nothing in the Act to require the insurers to delay payment to allow other claimants to "catch up": "On the contrary, the Act would enable a claimant in an appropriate case to take enforcement proceedings against an insurer’s assets. In addition, an insurer that delayed payment would be exposed to additional interest charges, which it could have avoided by prompt payment, if the insurance fund turned out to be sufficient to meet all claims". As with the UK Third Parties (Rights against Insurers) Act 1930, the Act had not addressed the problem of multiple claimants on a limited insurance fund.

Although the Privy Council recognised that there could be "good policy arguments" in some circumstances to create a scheme for the rateable payment of claimants, it held that it was for Parliament to address this issue.