The Nicholls decision has been addressed from a variety of perspectives by our personal injury and travel litigation team, focussing particularly on the increasingly endangered species of the injured person’s direct claim against the insurer of the alleged tortfeasor or contract breaker. On its face, it has no bearing on a package claim brought by the British holidaymaker against the British tour operator for the consequences of the slippery pool surround, leaking air conditioning unit or indeed dodgy bit of chicken.
But there is one scenario where it might come into play but which, invariably, does not feature in the claim, to protect not the holidaymaker but the tour operator.
Spanish law, the governing law in Nicholls, provides (in line with numerous other systems of law) for a direct right of action against the liability insurer. It is a general right, not limited to motor insurers, as it is here, nor limited to personal injury actions for the benefit of the injured individual. So a tour operator with a claim against a Spanish hotel because the latter breached the accommodation contract with the tour operator by supplying guests with undercooked chicken is likely also to have a direct claim against that hotel’s insurer. Since the law of the insurance contract between Spanish hotel and Spanish insurer is almost certain to be Spanish law, the British tour operator may be able to rely on the direct right against the insurer quite irrespective of the law governing the contractual obligations of the hotel.
So the British tour operator may well be within its rights to bring its claim for contribution not against the hotel, but (or additionally) against the insurer. Permission would be needed to serve the insurer, but there is a specific Part 20 gateway (CPR 6BPD 3.1(4), where the proposed part 20 defendant is a ‘necessary or proper party to the claim or additional claim); and forum arguments may be no harder as against the insurer than as against the hotel – geographical scope provisions in the insurance contract aside.
And where it really could get interesting is that the question of penalty interest in Spain applies as between any claimant and any insurer. The Supreme Court decisions on its scope are almost always commercial cases involved well-heeled litigants. If the tour operator wins its claim against the insurer, on the face of it, it should be entitled to claim penalty interest (let us not forget, running at 20% per annum from the second anniversary) on top of its claim for damages unless, as paragraph 8 of Section 20 of the relevant Act provides, “… the failure to indemnify or to pay the minimum sum known to be due, is founded in a justified reason or in a reason which is not attributable to the insurer”. And as the Spanish Supreme Court has clarified in recent years, in a hardening of its previous stance, it is not a defence to a claim for penalty interest that the insurer reasonably considered it was not liable to provide the indemnity, nor that it considered the claim would fail, nor even that the claim made was inflated and certainly higher than the sum awarded. The appropriate course is for the insurer to pay the claimed loss pending resolution.
One could of course foresee entertaining arguments ahead where the tour operator defends the claim hotly against the injured person (and loses), but simultaneously argues that the insurer should pay penalty interest equal to or even exceeding the damages paid to the injured person for unreasonably declining to pay sooner. Obviously the writer is not suggesting this should happen, but could it? Time will tell.
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