KR AND OTHERS VERSUS ROYAL & SUN ALLIANCE PLC [2006] EWHC 48 (QB)
FACTS:-
Eight Claimants claimed against the Royal and Sun Alliance pursuant to section 1 of the Third Parties (Rights against Insurers) Act 1930 (“the 1930 Act”). They were all residents of a number of children’s care homes in North Wales, known as the Bryn Alyn Community (“Bryn Alyn”). Bryn Alyn Community (Holdings) Limited (“the Company”) was incorporated in 1972 and in 1973 it took over the operation of the business, which did well for around two decades until it ended in financial failure in 1997 when it went into voluntary liquidation.
In 1995 John Allen was convicted of 6 offences of indecent assault against young male residents between 1972 and 1983. He and others also became the subject of allegations of abuse which were investigated by the North Wales Tribunal headed by Sir Ronald Waterhouse. Some of the allegations gave rise to civil actions and 15 lead cases against the Company were chosen to be tried before Connell J. 14 of these were heard between February and April 2001. The Royal and Sun Alliance (“the insurer”) was the liability insurer of the Company. Judgment was given in favour of 13 of the Claimants against the Company. There was then an appeal hearing (KR and others versus Bryn Alyn Community (Holdings) Ltd and another [2003] QB 1441) where again the Claimants were successful.
Following that appeal the 13 successful Claimants brought proceedings against the insurer under the 1930 Act. By that time five of the 13 Claims had been settled.
Firstly the insurer argued that there was no cover prior to the 22nd August 1976. The insurer said that it had no relevant documents which might throw light on cover before August 1976, nor any policy. This was relevant to 4 of the 8 Claimants. Secondly the policies in question excluded liability for the deliberate acts of the insured and/or precluded the insured from relying on its own wrongdoing. Thirdly the policy wording had been changed in 1981. The claims were excluded on the additional basis that the terms now excluded the wrongdoing of the insured’s partners, directors or managerial employers.
HELD:-
Mr Justice Simon considered the provisions of the 1930 Act and in particular section 1, which states that where the insured is a company that has been wound up, the insured’s rights as against its own insurers can in certain circumstances transfer to a third party to whom the company is liable.
He also considered the defences of the insurers, namely the “period of cover issue” and the “exception issues.”
He considered the terms of the relevant policies, the first which ran from 1976 to 1981 and the second which ran from 1981.
The period of cover issue
The first issue was that of the period of cover. Evidence was given by the insurer’s “Liability Account Manager” for the North of England, Mr Richard Prince. The insurer had created a computer search engine to enable it to show compliance with the Employer’s Liability Code of Practice, so it could say when it was or was not, an employer’s liability insurer. It had become compulsory from the 1st January 1972 for employers to obtain employers’ liability cover.
None of the policies that did exist could actually be produced but according to the insurer’s evidence, their terms were identified by reference to contemporary policies.
Mr Prince could not completely exclude the possibility of insurance prior to 1976 but said that it was extremely unlikely as the Company was legally required to have employer’s insurance after 1972 and took out policies from 1976.
Evidence was also given by the Company’s secretary, who had taken over in 1977. He said that the proceeding Company Secretary had been conscientious and that he would have known, if there was no insurance when he began in his position in 1977.
There was written evidence from the insurers’ brokers, Williams Insurance Brokers Limited. They said that the Company had been insured by the insurer for virtually all of its existence but they had no documentation. The brokers had told the Claimants’ solicitors that they had taken over the brokerage from another firm, Evans and Rowe, which had ceased to trade. However the written evidence from the actual people at Williams Insurance Brokers was vague.
Simon J said that the existence of a policy of insurance in 1975 did not, in the circumstances of the present case, assist in concluding whether there was pre-existing cover with the same insurer. The evidence from Williams Insurance Brokers Limited implied that when that business started in 1973, the Company was not one of its clients. The statement to the effect that the Company had been insured for “virtually” all of its existence suggested that the company had not been insured by the Insurer for all of its existence.
Simon J found that the likelihood was that the prior Evans and Rowe policy was not with the Insurer, since evidence from Williams Insurance Brokers Limited said that the broking was on a “best terms basis.” That indicated that the Company was not insured with the Insurer prior to August 1976.
The exception issues
Simon J began considered the arguments of the parties’ counsel. He began by saying that it was common ground that it was for the insurer to prove the application of the exception to the individual claims.
The trial judge (Connell J) had found that the abuse was the result of the Company’s negligence in relation to the adequacy of the system, its organisation and supervision. Those finding were applied to individual claims. There had been no finding that the injury or damage resulted from the deliberate act or omission on the part of the assured, its servants or agents, in respect of which liability attached.
In any event, in order to avoid liability the insurer has to show that the loss and damage resulted from “the deliberate act of (the Company)” under the 1976 policy or “the deliberate act of (the Company) it’s….directors or managerial employees” (under the 1981 policy). The acts of sexual and physical abuse which were found by Connell J to have occurred from 1973 to 1991 were not the acts of the Company. Neglect permitted deliberate acts of abuse to occur, but the deliberate acts were caused by the abusers. The exception in the insurance contracts was only concerned with an act or omission which was deliberate and which, as a matter of law, was the act or omission of the Company. None of the cases concerned damage which resulted from the deliberate act or omission of the Company. At the root of the claim was the negligence that permitted deliberate acts of abuse to occur but these acts were not acts of the Company. The precise status of the abuser within the Company was not the material issue. It was the role of the abuser which was significant. In each case they were not acting in a managerial role, they were acting for their own ends.
The insurers’ defence on the exception issues would therefore fail.
There was an appeal in this case to the Court of Appeal which can be seen in KR and Others Versus Royal & Sun Alliance Plc [2006] EWCA Civ 1454.
FACTS:-
Eight Claimants claimed against the Royal and Sun Alliance pursuant to section 1 of the Third Parties (Rights against Insurers) Act 1930 (“the 1930 Act”). They were all residents of a number of children’s care homes in North Wales, known as the Bryn Alyn Community (“Bryn Alyn”). Bryn Alyn Community (Holdings) Limited (“the Company”) was incorporated in 1972 and in 1973 it took over the operation of the business, which did well for around two decades until it ended in financial failure in 1997 when it went into voluntary liquidation.
In 1995 John Allen was convicted of 6 offences of indecent assault against young male residents between 1972 and 1983. He and others also became the subject of allegations of abuse which were investigated by the North Wales Tribunal headed by Sir Ronald Waterhouse. Some of the allegations gave rise to civil actions and 15 lead cases against the Company were chosen to be tried before Connell J. 14 of these were heard between February and April 2001. The Royal and Sun Alliance (“the insurer”) was the liability insurer of the Company. Judgment was given in favour of 13 of the Claimants against the Company. There was then an appeal hearing (KR and others versus Bryn Alyn Community (Holdings) Ltd and another [2003] QB 1441) where again the Claimants were successful.
Following that appeal the 13 successful Claimants brought proceedings against the insurer under the 1930 Act. By that time five of the 13 Claims had been settled.
Firstly the insurer argued that there was no cover prior to the 22nd August 1976. The insurer said that it had no relevant documents which might throw light on cover before August 1976, nor any policy. This was relevant to 4 of the 8 Claimants. Secondly the policies in question excluded liability for the deliberate acts of the insured and/or precluded the insured from relying on its own wrongdoing. Thirdly the policy wording had been changed in 1981. The claims were excluded on the additional basis that the terms now excluded the wrongdoing of the insured’s partners, directors or managerial employers.
HELD:-
Mr Justice Simon considered the provisions of the 1930 Act and in particular section 1, which states that where the insured is a company that has been wound up, the insured’s rights as against its own insurers can in certain circumstances transfer to a third party to whom the company is liable.
He also considered the defences of the insurers, namely the “period of cover issue” and the “exception issues.”
He considered the terms of the relevant policies, the first which ran from 1976 to 1981 and the second which ran from 1981.
The period of cover issue
The first issue was that of the period of cover. Evidence was given by the insurer’s “Liability Account Manager” for the North of England, Mr Richard Prince. The insurer had created a computer search engine to enable it to show compliance with the Employer’s Liability Code of Practice, so it could say when it was or was not, an employer’s liability insurer. It had become compulsory from the 1st January 1972 for employers to obtain employers’ liability cover.
None of the policies that did exist could actually be produced but according to the insurer’s evidence, their terms were identified by reference to contemporary policies.
Mr Prince could not completely exclude the possibility of insurance prior to 1976 but said that it was extremely unlikely as the Company was legally required to have employer’s insurance after 1972 and took out policies from 1976.
Evidence was also given by the Company’s secretary, who had taken over in 1977. He said that the proceeding Company Secretary had been conscientious and that he would have known, if there was no insurance when he began in his position in 1977.
There was written evidence from the insurers’ brokers, Williams Insurance Brokers Limited. They said that the Company had been insured by the insurer for virtually all of its existence but they had no documentation. The brokers had told the Claimants’ solicitors that they had taken over the brokerage from another firm, Evans and Rowe, which had ceased to trade. However the written evidence from the actual people at Williams Insurance Brokers was vague.
Simon J said that the existence of a policy of insurance in 1975 did not, in the circumstances of the present case, assist in concluding whether there was pre-existing cover with the same insurer. The evidence from Williams Insurance Brokers Limited implied that when that business started in 1973, the Company was not one of its clients. The statement to the effect that the Company had been insured for “virtually” all of its existence suggested that the company had not been insured by the Insurer for all of its existence.
Simon J found that the likelihood was that the prior Evans and Rowe policy was not with the Insurer, since evidence from Williams Insurance Brokers Limited said that the broking was on a “best terms basis.” That indicated that the Company was not insured with the Insurer prior to August 1976.
The exception issues
Simon J began considered the arguments of the parties’ counsel. He began by saying that it was common ground that it was for the insurer to prove the application of the exception to the individual claims.
The trial judge (Connell J) had found that the abuse was the result of the Company’s negligence in relation to the adequacy of the system, its organisation and supervision. Those finding were applied to individual claims. There had been no finding that the injury or damage resulted from the deliberate act or omission on the part of the assured, its servants or agents, in respect of which liability attached.
In any event, in order to avoid liability the insurer has to show that the loss and damage resulted from “the deliberate act of (the Company)” under the 1976 policy or “the deliberate act of (the Company) it’s….directors or managerial employees” (under the 1981 policy). The acts of sexual and physical abuse which were found by Connell J to have occurred from 1973 to 1991 were not the acts of the Company. Neglect permitted deliberate acts of abuse to occur, but the deliberate acts were caused by the abusers. The exception in the insurance contracts was only concerned with an act or omission which was deliberate and which, as a matter of law, was the act or omission of the Company. None of the cases concerned damage which resulted from the deliberate act or omission of the Company. At the root of the claim was the negligence that permitted deliberate acts of abuse to occur but these acts were not acts of the Company. The precise status of the abuser within the Company was not the material issue. It was the role of the abuser which was significant. In each case they were not acting in a managerial role, they were acting for their own ends.
The insurers’ defence on the exception issues would therefore fail.
There was an appeal in this case to the Court of Appeal which can be seen in KR and Others Versus Royal & Sun Alliance Plc [2006] EWCA Civ 1454.