Tort, Insurance and Ideology: Further Thoughts

AuthorRob Merkin
Publication Date01 May 2012
Volume 75 May 2012 No 3
Tort, Insurance and Ideology: Further Thoughts
Rob Merkin*
This article explores the impact of insurance arrangements on the development of the law of
obligations.It is accepted orthodoxy that the existence or otherwise of a duty of care in tort should
be determined independently of the parties’ underlying insurance arrangements. This article
suggests that the traditional analysis is of limited value only, in that it fails to take full account of
contractual arrangements which rest upon risk allocation backed by insurance; of the circum-
stances in which duties of care may arise; and of the relevance of insurance to the determination
of the standard of care and causation principles. It is further suggested that insurance has a much
greater part to play in the spreading of losses arising out of private suits than has to date been fully
For many years the seminal article published by Professor Jane Stapleton in 1995,
Tort Insurance and Ideology,1has been regarded as more or less2the last word on the
question of whether the law of obligations in general, and tort law in particular,
is or should be influenced by insurance considerations.Professor Stapleton’s basic
argument is that tort law is concerned with personal responsibility, so that the
ability of the defendant to procure liability insurance, or indeed the knowledge
that the defendant does possess liability insurance, should not affect the impo-
sition or scale of liability in tort, because to take insurability and insurance into
account would undermine the punishment and deterrence which flows from
personal responsibility.3For the same reason, judicial assumptions or actual
knowledge about the claimant’s first party insurance position should be disre-
garded.This is very much a defence of the integrity of the tort system, and implies
that the courts should not be concerned that the vast majority of defendants
*University of Southampton;Norton Rose Group. My thanks to Jenny Steele,Bob Lee, Caroline Jones
and two anonymous referees for comments:er rors and omissions remain my own.
1 (1995) 58 MLR 820.
2 Although see J. Morgan in‘Tort,Insurance and Incoherence’ (2005) 67 MLR 384, who takesissue
with Professor Stapleton’s dismissal of the actual evidence that the courts do take liability insurance
into account. See infra.
3 She thus favours corrective justice (the fairness or otherwise of allowing the claimant to recover)
over distributive justice (the spreadingof losses throughout society). The former approach is taken
to its outer limits by Weinr ib,The Idea of Private Law (Cambridge, Mass: Harvard UP, 1995), who
asserts the moral dimension of corrective justice to the admitted exclusion of reality.
© 2012The Author.The Modern Law Review © 2012 The Modern Law ReviewLimited. (2012) 75(3) MLR 301–323
Published by BlackwellPublishing, 9600 Garsington Road, Oxford OX42DQ, UK and 350 Main Street, Malden,MA 02148, USA
responsible for personal injuries – employers and motorists – are required to be
insured against liability, and that liability cover for other for ms of loss is actually
in place where insurance is not compulsory. Nor should the courts be concerned
that many claimants have first party insurance cover ing their own losses.
The argument runs that if insurability or actual insurance are taken into
account in decisions, they cease to be based on pr inciple and instead focus on
distributive justice, and such decisions – insofar as they relate to notions of
insurability – are likely to be misguided because the courts have no way of
knowing what risks are and are not insurable. It is thus necessary to focus on
principle. Professor Stapleton points out that the imposition of liability may be
tempered by issues of indeterminacy, but that references to insurability are simply
a surrogate for concerns affecting indeterminacy and should be disregarded.
In its place this analysis is unexceptional and indeed powerful.The present
author nevertheless asserts that it underplays the role of insurance in the law of
obligations.The concern here is not with the undoubted effect of insurance on
claims. It is indisputable that:4(at least for the moment5) litigation funding (Before
the Event and After the Event) insurance determines which claims are brought;
proceedings against a defendant who is uninsured and otherwise not good for
the money are pointless;6a claim will insofar as is possible be framed so that it
matches policy coverage;7and if there is insurance then the amount of that
insurance will more often than not dictate the terms of any settlement.8The
question, rather, is whether the scope of liability is,and should be,affected by the
presence or absence of insurance covering the loss. The matter is these days
scarcely discussed in modern UK texts,9and where it is the disregard of insurance
is a given.10 However, it is submitted that these assumptions need fur ther con-
sideration when they are extended to three further situations:contract claims; tort
claims based on contract; and tort claims where insurance is known to be in place.
4 T.Baker, ‘Liability Insurance asTort Regulation:Six Ways that Liability Insurance Shapes Tort Law
in Action’ (2006) Conn Ins LJ 1.
5 The Legal Aid,Sentencing and Punishment of Offenders Bill 2011, implementing the report of Sir
Rupert Jackson, Review of Civil Litigation Costs: Final Report (The Stationery Office, 2009),will in
practice do away with ATE insurance in most cases by preventing ATE premiums from being
recovered by the claimant as costs.
6 Hence the unsuccessful attempt by a defendant in WestLondon Pipeline vTotal UK [2008] EWHC
1729 (Comm); [2008] Lloyd’s Rep IR 688 to secure the liability policy details of a sub-contractor
in order to determine whether he should be joined to the proceedings as co-defendant.
7 However, that will not work if the facts asserted by the claimant demonstrate fraud, even if that
word is carefully omitted from the pleadings in order to prevent the policy coverage from being
negatived: MDIS vSwinbank [1999] Lloyd’s Rep IR 516; Persimmon Homes Ltd vGreat Lakes
Reinsurance (UK) Plc [2010] EWHC 1705 (Comm); [2011] Lloyd’s Rep IR 101.
8 There is much US authority for the proposition that a liability insurer who refuses to settle with
the third party within policy limits exposes himself to an action by the assured for damages
representing the amount by which the damages ultimately awarded exceeds policy limits. See,
O. Gurses, ‘Extra-Contractual Liability: An Insurance Overhead or a Reinsurance Recovery?’
(2011) JBL 763.
9 See J. Steele,‘Tort, Insurance, and the Resources of Private Law’ in S. Degeling, J. Edelman and
J. Goudkamp, Torts in Commercial Law (Thomas Reuters Australia,2011), who notes that there are
plenty of academic tort lawyers but very few academic insurance lawyers, so that the link between
the two is often overlooked.
10 Eg, R. H. Stevens, Torts and Rights (Oxford: OUP, 2007) 109.
Tort, Insurance and Ideology
© 2012 TheAuthor.The Moder n Law Review© 2012 The Modern Law Review Limited.
302 (2012) 75(3) MLR 301–323

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