Arbitration Time Limits and the Third Party (Rights Against Insurers) Act 1930

The claims arose under a liability policy issued by the Defendant insurer, Quinn, to a building and roofing contractor, A Lenihan Ltd ("Lenihan").

Upon two judgments being issued (August and December 2009), Lenihan was found liable to indemnify the Claimant ("WMS") for fire damage sustained to a shop and residential premises in Lewes, East Sussex, in September 2006.

Lenihan had sought indemnity for the claim under its liability policy, but Quinn denied coverage on the grounds of breach of certain policy conditions, and took no part in the defence of the litigation against its insured. Accordingly, the judgment against Lenihan was not satisfied, and it went into voluntary liquidation.

WMS then sought to pursue the claims for recovery directly against Quinn, pursuant to the Third Party (Rights Against Insurers) Act 1930. Quinn mounted a defence based upon contractual time bar. The policy which Quinn had issued to Lenihan contained a requirement that all disputes were to be referred to arbitration within 9 months of a dispute arising. If there was no referral to arbitration within 9 months, the claim was deemed to be abandoned. Quinn argued that the 9 month clock started to tick from the point at which it informed Lenihan that coverage was denied1 . As no proceedings had been commenced within the time stipulated under the policy, WMS's claim was destined to fail. Quinn sought summary judgment to dismiss the case against it.

WMS argued that under a liability policy a right of action only arose against an insurer once the insured's liability to a third party was established. Lenihan's liability had been established by the judgments of August and December 2009, and therefore the 9 month time period had not expired by the time that WMS brought its claim against Quinn. The following issues were required to be determined:

Whether, if properly construed, the arbitration clause still allowed the right to pursue a claim by litigation, or was an exclusive remedy. Alternatively, if the arbitration clause was exclusive and the right to bring a claim in arbitration did expired after 9 months, was the clause unusual and onerous and, Quinn having failed to bring it to Lenihan's attention, resulted in it not being incorporated in the policy. Alternatively, if the arbitration clause was incorporated and the right to pursue litigation was excluded, had the 9 months period expired. Alternatively, if time had expired, could an extension of time be granted for...