Litigating Against Insolvent Insureds In The Cayman Islands: Whose Money Is It Anyway?

Published date04 October 2021
Law FirmOgier
AuthorMr James Clifford and Rebecca Findlay

When a plaintiff obtains judgment against an insured but insolvent defendant in the Cayman Islands is the plaintiff entitled to the policy proceeds or do they have to be paid to the liquidator for the benefit of the defendant's creditors? The answer is yes when the claim involves a vehicle but is less clear in other cases. This article considers the arguments for and against a plaintiff being entitled to the policy proceeds in cases that do not involve a vehicle.

Background

On 28 January 1927 Mr Chaplin was knocked down by a taxi belonging to the Harrington Motor Company Limited. He sued and was awarded damages and costs in the sum of '541 13s. 5d. However, before he could recover, the company went into liquidation and the insurers paid the money, less some outstanding premiums, to the liquidators. Mr Chaplin issued a summons seeking an order that the liquidators pay him the money and lost. He appealed to the Court of Appeal and lost again. The position was clear: Mr Chaplin had no contract with the insurers under which he could recover the money; and, under the law of insolvency, the assets of an insolvent company are to be distributed equally amongst its creditors.

In Re Harrington Motor Company Limited, ex parte Chaplin 1928 Ch. 105, led to the passing, in England, of the Third Party (Rights against Insurers) Act 1930, which, in the event of insolvency or winding up, transferred the rights of the insured under the policy to the person to whom the liability was incurred. The 1930 Act was subsequently re-enacted in England as the Third Party (Rights against Insurers) Act 2010.

Section 9 of the Vehicle Insurance (Third Party Risks) Act (2012 Revision)

But what is the position under Cayman law? Section 9 of the Vehicle Insurance (Third Party Risks) Act (2012 Revision) is in very similar terms to the equivalent English section and does not, itself, refer to vehicles. But, whereas the English section is clearly of general application, section 9 is to be found in an Act that is entitled the, "Vehicle Insurance (Third Party Risks) Act," and which in all other respects deals entirely with vehicle insurance. Is section 9 also of general application or is it limited to cases involving vehicles?

Suppose that the general partner of a Cayman Islands exempted limited partnership successfully sues the manager for something in respect of which the manager is insured. Suppose then that the manager becomes insolvent. Should the damages be paid to the general partner...

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