Insurer Pays Plaintiff’s Costs up to date of Repudiation

PUBLISHED: 9th February 2018

Following the denial of cover by an insurer, the High Court in Ireland granted an insurer-appointed defence solicitor firm liberty to come off record but the court placed reliance on an express undertaking that the insurer would meet the costs of the plaintiff up to that date.

The case of Ye Shi v Ernst & Young Limited and RMC Leisure Limited trading as Event Works [2017] IEHC 804 involved an alleged trip and fall by the plaintiff at a sporting event in Dublin.

At the outset, the insurer of the second defendant (RMC) appointed a firm of solicitors (the firm) to defend the claim on RMC’s behalf.  The defence of the case proceeded in the normal way.

It was an express term and condition of the policy of insurance that RMC would be liable for and discharge a policy excess of €2,500 in respect of each and every claim.  It was the insurer’s position that the payment of the excess was a prerequisite to the provision of indemnity in respect of the plaintiff’s claim and that the insurer was entitled to demand the excess as an upfront payment from RMC.  It would appear that the insurer demanded the excess from RMC but that it was not paid, as a result of which the insurer declined to indemnify RMC.

The insurer instructed the firm to apply to the court to obtain permission to come off record and no longer act for RMC.  While RMC did not dispute the insurer’s entitlement to repudiate, the plaintiff challenged the firm’s application to come off record.  As noted by Ms Justice Faherty in her judgment, much of the argument between the plaintiff and the firm centred on the issue of whether the insurer was entitled to repudiate the policy of insurance.  In applying the principles established in O’Fearail v McManus, the learned judge held that, irrespective of whether repudiation by an insurer was correct or incorrect, to refuse an application to come off record would be to insist on a forced liaison between the firm and RMC.  In granting leave to the firm to come off record, the court appears to have placed reliance on an express undertaking by the insurer that it would meet the costs of the plaintiff up to the date the firm came off record.

In affirming pre-existing law, the case reminds insurers that they need to investigate and deal with indemnity issues as soon as possible to avoid the risk of having to pay significant costs to a claimant, notwithstanding the insurer having a contractual right to repudiate.