In the recent case of the DPP v Donnelly, the Supreme Court found that a motor insurer is not directly liable to third parties injured through the negligence of a person driving with the owner’s consent but without being named on their insurance policy.
The facts of the case were that, Mr Donnelly was stopped by the Gardaí when driving his father’s car, with his father’s consent. When the Gardaí asked him for his insurance, he later produced a certificate for a policy of insurance on which he was not named. Mr Donnelly was prosecuted under the Road Traffic Act 1961(the “Act”) which prohibits driving a vehicle in a public place unless one of a number of alternative conditions is met, namely: (i) a vehicle insurer or an exempted person would be liable for injury caused by the negligent use of the vehicle; or (ii) an approved policy of insurance is in force whereby the liability of the user in respect of negligent use is insured against any claims.
Mr Donnelly appealed the District Court’s decision to convict him of driving without insurance to the Circuit Court. On hearing the appeal, the Circuit Court referred two questions to the Supreme Court.
The first question was whether the reference to a “vehicle insurer” in the Act includes instances where an approved policy of insurance exists, but that policy does not cover the person driving the vehicle. To answer this question, the Supreme considered the scope of the insurer’s liability.
The Supreme Court decided that the “vehicle insurer” would not have been liable if Mr Donnelly had caused personal injury or other damage to a third party by driving negligently. The reason for this finding was that a motor-insurance policy is a policy of indemnity, under which the insurer indemnifies the insured. The insurer’s liability is not, however, directly owed to the injured third party. Instead, the injured third party’s direct right of action will generally be against the person that is responsible for causing the injury.
The second question referred was whether a vehicle insurer could avoid liability on the basis of a clause in the contract of insurance which limited cover to persons who were either named or indicated in the policy of insurance. This second question could only arise where the insurer would be liable for the injury. As this circumstance did not arise in the case the Supreme Court did not consider the question.
When insurance companies are drafting policy terms and conditions, they should ensure that they understand the scope of their liability. More particularly, companies should be careful to avoid putting terms in their policy documents that might unintentionally create a direct liability to a third party that would not otherwise exist.
Contributed by: Kerrie Glynn
