Solicitors' Professional Indemnity Insurance 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. In this regard, the decision in Kennedy v Casey ([2015] IEHC 690) provides further comfort for insurers in the context of solicitors' professional indemnity insurance.

Background

The plaintiffs instructed a firm of solicitors to pursue a claim against the Irish government. The defendants to the state proceedings (which have been set down for hearing but not determined) pleaded the statute of limitations by way of defence, together with laches and delay. Consequently, the plaintiffs brought proceedings against their former solicitors claiming that they were negligent in failing to institute the state proceedings in a timely manner.

The Solicitors Mutual Defence Fund initially instructed solicitors to come on record for the defendants in the negligence proceedings. However, the solicitors successfully applied to come off record following the fund'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 fund as a co-defendant to the proceedings. The plaintiffs contended that the fund was a party whose presence before the court was necessary to enable the court to effectually and completely adjudicate on the questions involved in the negligence proceedings. The plaintiffs further contended that having regard to the present unsatisfactory state of the law in respect of third-party rights in the context of insurance contracts, the court should interpret Section 26 of the Solicitors (Amendment) Act 1994 and the regulations thereunder in a manner similar to Section 62 of the Civil Liability Act 1961.

Decision

The court accepted the fund's submission that the plaintiffs clearly had no contractual nexus with it. The fund was never an insurer of the plaintiffs, had no dealings with them and, perhaps more significantly, had not been the subject of any application by the defendants (who had 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 fund.

The plaintiffs argued that the defendant solicitor and fund were "joined at the hip" by legislation and applicable regulations, to such an extent as to overcome any objections based on locus standi or lack of privity. The plaintiffs submitted that...