Camden Contribution Curtailed: TPRA 2010 Developments

Recent cases highlight potential difficulties for insurers in handling claims under the Third Parties (Rights against Insurers) Act 2010 (“the TPRA”).

By way of reminder, the TPRA allows a third party claimant to pursue a recovery directly against an insolvent insured’s liability insurer, both to establish the insured’s liability to the claimant, and coverage under the policy, in the same action, without the need to join the insured to the proceedings. In relation to the underlying liability claim, the insurer is permitted to rely, as against the third party, on any defences that would have been available to the insolvent insured.

In Riedwig v HCC International Insurance plc & another [2024], the High Court (Master Brightwell) dismissed a liability insurer’s application to bring a Part 20 claim against the claimant’s professional advisors, seeking a contribution in respect of the insurer’s potential liability to the claimant under the TPRA.

The claim arose from alleged negligence by Goldplaza Berkeley Square Ltd (“Goldplaza”) in producing a valuation of property on Camden High Street. The claimant sought to recover her consequent losses from Goldplaza, and subsequently its professional indemnity insurers, HCC, following Goldplaza’s insolvency in 2021.

HCC applied to join the solicitors who had acted for the claimant on the original property transaction to the TPRA proceedings. The parties agreed that Goldplaza and the solicitors were potentially liable for the “same damage”, based on section 1 of the Civil Liability (Contribution) Act 1978 (“the CLCA”), which provides that:

“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)”    

However, the Court held that the insurer and the solicitors were not liable for the same damage. The insurer was potentially liable under the policy, while the solicitors were allegedly liable for financial loss resulting from the property transaction. Following Bovis Construction v Commercial Union [2001], approved by the House of Lords in Royal Brompton Hospital v Hammond [2002], “an insurer does not inflict damage on anyone … the only damage it is capable of inflicting is in refusing to meet its obligations under the policy of insurance”.

The Judge noted that the purpose of the TPRA is to enable a claimant to pursue an insurer directly in respect of the liability of its insured, and for the claimant to stand in the insured’s place for that purpose, not the insurer. The insurer does not become liable for damage caused by its insured, and the fact that the insured might have a contribution claim against third parties does not mean that the insurer also has that right.

Depending on the type and stage of insolvency proceedings, insurers may be able to apportion loss with third parties by a more convoluted route of joining the insolvent insured to TPRA proceedings (as HCC had intimated an intention to do) or else by way of subrogated recovery, after settling a policy claim. Alternatively, an assignment of the insured’s contribution rights could potentially be made to the insurer, through policy wording or subsequent agreement.

Liability insurers are generally required nowadays to take a more proactive approach to defence of litigation against an insolvent insured, since judgment in default may suffice to establish liability under the TPRA, even if it does not follow consideration on the merits of the underlying claim. This was confirmed by the Scottish Inner House, Court of Session, in the recent appeal decision Scotland Gas Networks plc v QBE [2024], upholding the first instance findings considered in our previous article.

While the intention behind the CLCA is to broaden the class of potential contributing parties, where a number of defendants share responsibility for a claimant’s loss, the ability of an insurer to seek contribution from third parties is limited in the context of TPRA claims.

Authors:

Amy Lacey, Partner