QUANTUM CLAIMS COMPENSATION SPECALISTS LTD V WREN INSURANCE SERVICES LTD

[2012] ScotCS CSIH_8, Court of Session, Inner House, Lord Reed, Lord Drummond Young and Lord Marnoch, 1 February 2012

Insurance (after the event) - Three additional defendants added to claim - Whether consent of insurers should have been sought under policy

Quantum funded and managed civil litigation for clients. Quantum obtained an after the event policy from Wren under which Wren was to indemnify Quantum for £90,000 in excess of a £10,000 deductible for awards of costs against Quantum in the event that an action funded by it failed. Clause 1(k) excluded Wren's liability for "any Defendants Costs, Own Disbursements and Own Costs which have been incurred after the Insured and/or their Client becomes aware of any fact or matter which adversely affects the prospect of success in any Legal Action or the quantum of the Claim unless Underwriters have given their prior written consent which will not be unreasonably withheld". Quantum pursued a personal injury road accident claim against Mrs Carter, who was partially disabled due to multiple sclerosis, and during the proceedings decided to add as co-defendants the garage and employees responsible for installing hand controls on Mrs Carter's vehicle. Wren's consent was not sought. At first instance the court ruled that this was a breach of clause 1(k). That provision did not require Quantum to report to Wren every factor which might adversely affect the prospect of success, so that the condition was not broken by failure to report a medical report on the claimant's condition, but the addition of three defendants, against whom an essentially alternative action was brought, was of material concern to Wren and should have been reported to them under clause 1(k). That conclusion was reversed on appeal. The additional defendants were not a part of the original action and accordingly the claims against them were not within the insured risk. The word "success" referred to the outcome of the insured action, and the addition of other defendants did not affect that matter. The parties had not agreed that the assured was under any obligation to inform the insurers of anything which would materially affect the prospects of their having to indemnify their client rather than merely informing them of the client's prospects of success in the litigation.