As a general proposition, in determining the two parties in any legal dispute the fact that one of them is insured does not play any significant role in deciding their respect rights, duties and obligations. In fact, at Common Law the circumstances that a defendant is contractually indemnified by a third party (e.g. an Insurance Company) against a particular legal liability does not and cannot have any relevance whatever to the measure of that liability.
The above has been well settled beyond cavil by a plethora of judicial authorities. See for example the observation of Viscount Simonds in the case of Lister v Romford Ice and Gold Storage Co. Ltd. (1957) 1 All.E.R.125 at 139. See also Lord Bridge in Hunt v Severs (1994) 2 AllER 385 at 395.
However, we cannot deny the fact that the widespread availability of liability insurance especially since the early part of the twentieth century has had a profound effect on the law of torts as a mechanism for compensating for death and personal injuries. Hence the result seems to be that there is a fundamental judicial dilemma revealed in many of the cases in these two areas of Law Insurance and tortuous liability. No less eminent judicial authority has recognized this dilemma than Lord Wilberforce in the case of Morgan v Launchberry (1972) 2 AllER 606 at 611 when the learned Law Lord observed that, “Liability and Insurance are so intermixed that judicially to alter the basis of liability without adequate as to the impact this might make upon the insurance system would be dangerous, and in my opinion, irresponsible.”
Liability under the Common law is determined upon the notion of loss shifting which simply entails that either the plaintiff or the defendant, or sometimes both, must individually bear the loss and the principal criterion is generally based on “fault” or “blameworthiness.” Insurance comes in as loss distribution mechanism.
Legislations have also been used to enhance the compensation system. Statutes may enable proceedings to be brought against the estate of a deceased tortfeasor/wrongdoer and this is no doubt a direct consequence of the system of compulsory road accident liability insurance, which was introduced in the 1930s. See The Law Reform (Miscellaneous Provisions) Act, 1934. Even where the plaintiff himself may have been negligent, this is not a ground to completely deprive him of all right to damages merely because he has been negligent in circumstances where the defendant is also at fault. The law in trying to be fair and reasonable as far as “shifting loss” and loss distribution are concerned, has recognized the concept of contributory negligence under which the liability of the defendant may be reduced on the ground that the plaintiff contributed to his injury, damages or loss. See for instance The Law Reform (Contributory Negligence Act 1945. Manufacturers, motorists and employers can ignore proper and effective insurance at their peril.
It must be appreciated that the introduction by statute of compulsory liability, first for road accidents and later for industrial accidents, has changed the whole focus of the law of torts from penalizing tortfeasors to compensating their victims. However, it cannot be over emphasized that the system of compulsory road accident liability insurance under different Road Traffic Acts recognizes the fact that liability insurance is a method of compensating accident victims and ought not be treated as though it were merely a device for protecting a tortfeasor/wrongdoer against legal liability. That is why the Road Accident Act actually compels insurance in respect of death or bodily injury arising from the use of motor vehicle on a road.
Legislative Polity lends itself to compensation of victims rather than protection of the wrong doer in the above mentioned statute/legislation. An essential aspect of the legislative policy in ensuring compensation for accident victims under Road Traffic Act/Statute is the vital fact that matters arising under the contract of insurance between the insured and the insurer should not be allowed to defeat the claims of the accident victim. Hence, where the insured obtains a policy by fraud or misrepresentation, for instance, the insurerﾴs normal legal right to avoid the contract is severely curtailed. Even where the insured breaks some condition in the policy in respect of the condition of the vehicles or the driver e.g. that the vehicle must not be driven in an unroadworthy condition, or that the driver must not drive while drunk, none of the above will affect the rights of the accident victim, notwithstanding the fact that the insured may be under a liability to indemnify the insurer against the damage which the insurer has to pay.
It is in the spirit of law being used as an instrument of social engineering that in circumstances where for example, the policy may have been obtained by fraud or misrepresentation or even where the insured may have been guilty of a breach of a condition of the policy, the Road Traffic Act does not permit an insurer to escape all liability to an accident victim in any of these circumstances simply by repudiating the policy which according to the law of contract he may be entitled to do because fraud, for instance can vitiate an otherwise valid contract.
Note further that under the Road Traffic Act, that the accident victim has a direct legal claim against the insurer, even though this claim cannot be enforced by legal action unless sand until the plaintiff has secured judgment against the tortfeasor/wrongdoer. This goes against the fundamental contractual doctrine of privity, which holds that only parties to a contract can sue or be sued on a contract. The accident victim has no contractual link, nexus or connection with the insurer although his action in this case exists in tort rather than contract, although based on the contract between the tortfeasor/wrongdoer and the insurer. Note that employees have no analogous right under the Employerﾴs Liability (Compulsory Insurance) Act 1969.
In the case of Tattersall v Drysdale (1935) 2 K.B 174, a Motor Insurance Policy declared that “this insurance shall extend to indemnify any person who is driving on the assuredﾴs order or with permission” in respect of various liabilities, which included third party risks. Section 36 (4) of the Road Traffic Act, 1930, which deals with Third Party Risks, provides:
“Notwithstanding anything in any enactment, a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability, which the polity purports to cover in the case of those persons or classes of persons.”
It was held that, upon the true construction of the section, the insurers where freed from the requirement of the life Assurance Act 1774, as to insurable interest and the presence in the policy of the name of the assured, and that the insurers were legally bound to indemnify all “persons or classes of persons” referred to in the policy, whether parties to the contract of insurance or not.
It was further held in the above case that where in a Motor Insurance policy a particular car is specified as the subject of insurance, and by a clause in the policy its benefits ﾖ are extended to the assured when driving another car with the owners permission, the interest of the assured ceases when the party with the specified car, and the extending clause falls together with the rest of the policy.
Insurance Law and its interrelationship with the principle of tortuous liability raise a question of general interest and considerable importance in the law of motorcar insurance. Questions of liability have to be determine as well as the quantum of damages to which the plaintiff is entitled. Judges must circumspectly and judiciously examine how far tort law is coping with the social and economic problems of allocating accident losses. Greater circumspection is even needed in particular in the imposition of liability on the defendant to ensure that especially in dealing with employers and other companies that play sensitive role in the society that the imposition of liability on the defendant will not be a crushing economic burden.
Law must be used as an instrument of social engineering. Besides parties caught up in insurance matters must seek legal advice early enough and not much later. Some issues relating Motorcar Insurance can be complex and can also affect not only civil rights, but criminal liabilities, for if for instance, a person uninsured in his own name is driving a friendﾴs car, he is committing an offence which may involve him in serious penalties unless he is covered by the policy granted to the owner of the car. It is immaterial that he does not know, after all ignorance of the law, they say, is no excuse.
By: Clement Chigbo
