Third parties' rights against insurers: limiting an exclusion

Burnett v Marcius [2018] CSOH 34 (Lord Uist, 5 April 2018) is an example of the use of the Third Parties (Rights against Insurers) Act 2010, which came into effect in August 2016 and replaced the 1930 Act. The Act makes it easier to pursue a claim against an insured party who has become insolvent by allowing proceedings to be raised directly against the insurer.

The pursuer was the widow of a man who died after being restrained by the first defender using a neck hold. The action was raised against a number of parties, including the first defender’s employers, a security firm (the second defenders). As the second defenders were in liquidation, the action proceeded against their public liability insurers under the 2010 Act. The pursuer sought to enforce the second defenders' rights under the insurance policy. The insurers relied on an exclusion for deliberate acts, arguing that it was irrelevant whether the first defender had intended to kill the deceased, as the blameworthy act itself – the restraint – had been intentionally committed and liability was therefore excluded.

The pursuer maintained that there was ambiguity about which acts had to be deliberate or wilful. The clause applied only when the outcome giving rise to liability was the intended objective, i.e. it applied only if the door steward had intended to kill the deceased and there was no evidence that this was the case. As there was ambiguity in the policy wording, this had to be construed contra proferentem.

Following a debate, Lord Uist granted decree of declarator, holding that the insurers were obliged to indemnify the second defenders in respect of their liability to the pursuer arising out of the death of the deceased, and that the second defenders' right to be indemnified had been transferred to, and vested in, the pursuer under ss 1 and 3 of the 2010 Act. The question to be decided was purely one of the construction of the policy. The pursuer’s case was that the death of the deceased had been caused by the first defender’s fault and negligence. There was no suggestion that he had intended to kill the deceased, although the judge did not accept that the first defender’s intention was irrelevant. Applying the contra proferentem rule, the pursuer’s argument that the clause applied only when the outcome giving rise to liability (i.e. the deceased’s death) was the intended objective, was correct.