High Court Confirms Solicitors PI Regulations Do Not Create Third Party Rights

A number of recent High Court decisions have confirmed that third party rights against insurers in Ireland are restricted. The recent High Court decision in Kennedy & Ors v Casey & Ors [2015] IEHC 690 provides further comfort for insurers in this regard in the context of the solicitors professional indemnity insurance. Background The plaintiffs instructed a firm of solicitors to pursue a claim against the Irish State ("the State proceedings"). The defendants to the State proceedings, which have been set down for hearing but not determined, have pleaded the Statute of Limitations by way of defence together with laches and delay. Consequently, the plaintiffs brought proceedings against their former solicitors ("the negligence proceedings") claiming that they were negligent in failing to institute the State proceedings in a timely manner. The Solicitors Mutual Defence Fund ("SMDF") initially instructed solicitors to come on record for the defendants in the negligence proceedings but those solicitors successfully applied to come off record following the SMDF's decision not to provide an indemnity to the defendants. The negligence proceedings were not progressed following this application. Instead, the plaintiffs issued a motion seeking to join the SMDF as a co-defendant to the proceedings. The plaintiffs contended that the SMDF was a party whose presence before the court was necessary in order to enable the court effectually and completely to adjudicate upon the questions involved in the negligence proceedings. The plaintiffs further contended that having regard to the present unsatisfactory state of the law with regard to third party rights in the context of insurance contracts, the court ought to interpret the provisions of section 26 of the Solicitors (Amendment) Act 1994 (provision of professional indemnity cover) and the regulations made thereunder in a manner similar to section 62 of the Civil Liability Act 1961. Decision The Court accepted the SMDF's submission that the plaintiffs clearly had no contractual nexus with the SMDF. They were never insurers of the plaintiffs, had no dealings with them, and, perhaps more significantly, had not been the subject matter of any application by the defendants (who did have such a connection) to be joined in the present proceedings. The Court also noted that the defendants had accepted the repudiation or withdrawal of cover by the SMDF. The plaintiffs argued that the defendant solicitor and SMDF were...