Third party liabilities and section 152 notices

One of the perennial bugbears of insurance companies is when to their horror, they find they are fixed with a liability to satisfy a judgment obtained against someone other than their insured, or against their insured when as a matter of contract law they would have a cast iron case to repudiate indemnity. Such is the magic of section 151 of the Road Traffic Act 1988.

Section 151 forms part of Part VI of the Act, which legislates for and is headed Third Party Liabilities. The section provides that insurers must meet judgments in respect of insured party liabilities, even if the insurer is not liable to its insured as a matter of contract.

The Parliamentary policy of imposing third party liabilities on the insurer of a vehicle irrespective of its contractual position to its insured, has stood since the Road Traffic Act 1934.

The key provision is section 151 and in particular section 151(5) providing that even if the policy did not cover the guilty driver and even if the insurer is entitled to avoid or cancel the policy or has avoided or cancelled it, the insurer is still obliged to meet the judgment. The only relevant exemptions require the insurer as a condition precedent to obtain a declaration pursuant to section 152(2).

In short, Parliament has decided that between an innocent insurer who may for example, be the victim of a fraudster, and an innocent motorist the undoubted victim of a tortfeasor, the public interest lies in the compensation of the motorist, at the expense of the insurer.

Looked at through the lenses of the European Convention on Human Rights, Parliament when striking a balance between the A1P1 rights of the insurer and motorist, and the motorists rights under article 6, has prescribed that the motorists rights prevail.

One notable exception and indeed, safeguard for a motor insurer, is found in the requirement to give notice of proceedings under section 152 of the Road Traffic Act 1988.

152.— Exceptions to section 151.

(1) No sum is payable by an insurer under section 151 of this Act—

(a) in respect of any judgment unless, before or within seven days after the commencement of the proceedings in which the judgment was given, the insurer had notice of the bringing of the proceedings,

This section has been the subject of judicial scrutiny on a number of occasions. See in particular Wylie.v.Wake [2001] RTR 291. In that case Kennedy LJ drew together various strands of authority. At paragraph 29 he noted:

Pausing there, it seems to me that certain conclusions can be drawn from the authorities.

(1) To show that the insured had notice of the bringing of the proceedings there must be more than evidence of a casual comment to someone who at times acted as an agent for the insurers (see Herbert v RPA Company).

(2) Any notification relied upon must not be subject to a condition which may or may not be fulfilled (see Weldrick and Harrington) but if the only condition is one which requires action from the recipients which they choose not to take then by making that choice they render the notice unconditional and thus effective (see Ceylon Motor Insurance Association Ltd ).

(3) The notice can be oral, and it need not even emanate from the claimant (see Harrington and Desouza). It can be given before proceedings have commenced, and it need not be specific as to the nature of the proceedings, (Desouza) or the court (see Ceylon and Harrington). .

(4) Whether in any given case it is shown that the insurer had notice of the bringing of the proceedings (as opposed to the making of a claim) is a matter of fact and degree (Desouza).

(5) The essential purpose of the requirement of notice is to ensure that the insurer is not suddenly faced with a judgment which he has to satisfy without having any opportunity to take part in the proceedings in which that judgement was obtained (Desouza).

The later case of Nawaz.v.Crowe Insurance [2003] EWCA Civ 316 is also on point, as it deals with the giving on notice by way of an oral exchange between a trainee solicitor and a legal secretary. It will be noted that the threshold of giving adequate notice is a very low one: even oral notice to a legal secretary in a telephone call concerned primarily with obtaining an address will constitute notice.

In summary, although the net of liability cast by section 151 is potentially wide, a valuable safeguard lies in the requirement to give notice under section 152 of proceedings. The hurdle for a claimant to meet is a low one however, and contrary to popular misconception, there is no requirement that notice is given in writing, though a prudent solicitor acting for a claimant will ensure that it always is.

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