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Somebody else’s insurer

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What if I am unhappy with somebody else’s insurer?

The main function of the Ombudsman is to investigate complaints where a member of the public is dissatisfied or unhappy with the result of the claim which has been made against his or her own Insurer.

Either the Insurer has repudiated the claim in circumstances where the Insured feels it was unjust or unfair to do so, or the Insurer is not prepared to pay the amount which the Insured feels it should pay. Remember that an insurer only owes an obligation to its policy holder and not to 3rd parties. The insurer’s only obligation is to indemnify its policy holder in terms of its policy.

Very often, however, the Ombudsman receives complaints from people who are unhappy, not with their own Insurer, but with somebody else's Insurer. Such complaints are unfortunately not within the Ombudsman's jurisdiction, but in any event, it nearly always results from a misunderstanding, because it is in fact very seldom indeed that a member of the public can have a legal right to claim anything from anybody else's Insurer.

Section 56 of the Insolvency Act creates a “cut through” provision in terms of which a 3rd party may proceed directly against an insurer where the insurer’s policy holder has been declared insolvent.  However, the insurer retains the same rights as against the 3rd party as it would have had against its policy holder.

The most usual situation where this occurs is in the case of a motor accident where you are uninsured, or you have an insurance which does not give you Comprehensive cover and where the other party to the accident is insured Comprehensively or against Third Party Liability.

Your contention is then that the other party's Insurer, because it has agreed to indemnify the other party, is now obliged to pay your claim since the accident was entirely the other party's fault. In one sense that may well be so in that that Insurer is indeed obliged to indemnify the other party against your claim, but its legal obligations are entirely toward the person with whom it contracted an agreement of insurance and it has no legal duty to you whatsoever. In fact, it is in the position where its main job is to protect its Insured, and if it can best protect its Insured in its view by refusing to pay your claim, then it is perfectly entitled to take up that attitude.

A mistake which members of the public often make under these circumstances is to try and deal with the third party's Insurer as if it were their own Insurer giving them full details of the accident, or supplying a full statement and "waiting for the Insurer to pay their claim".

Often this procedure may in fact afford the Insurer ammunition not to pay the claim, and the best method of recovery is very often not to have anything to do with the third party's Insurer at all, but to instruct a good Attorney to make a demand for payment of the full amount and if it is not received to sue the other party for his negligence or the negligence of his driver.

That may well send the other party flying into the arms of his Insurer, and your Attorney will then know how to deal with those Insurers, and what they are legally entitled to and what they are not entitled to.

One thing is certain - those Insurers have no obligations towards you, but only to their Insured, and you have no rights against their Insurer, but only against their Insured - and it is in that direction that your arrow should be aimed.

A second and allied position, which is also much misunderstood, is illustrated in the following scenario:-

Visiting your neighbour you unfortunately fall down his stairs and you break your leg. The neighbour says "don't worry, I am insured". That may well be the case, but that does not mean that you can put in a claim against the neighbour's Insurer and expect to get paid, just like that.

Once again, the Insurer indemnifies its own Insured and before it in terms of such indemnity will pay out any third party who alleges a claim against its Insured, it is going to have to be satisfied that its Insured has no defence to that claim - in other words, that the accident or incident was entirely due to the negligence of its Insured.

In the scenario sketched above, the Insurer will be very inclined to say that you were not looking where you were going and that there was nothing wrong with the step, and that the accident was your own fault. You will want to allege that the steps were not properly maintained and/or that they were over-steep, there was no indication that their danger was apparent, that the bannisters were shaky or were non-existent and that the steps were slippery and unattended, all of which indicate negligence on the part of the owner.

The only way you can establish that case is in fact by suing the owner after getting competent legal advice as to what your prospects of success might be.

The situation is often misunderstood, because the owner himself says to you "don't worry, I am insured" - this gives you the impression that you are going to get paid anyway.

Even if the owner wants to help and says "I am terribly sorry, it was all my fault, but don't worry I am insured", he may be giving you more hindrance than help, because his admission of liability to you may very well constitute a breach of the conditions of his Insurance Policy, which in turn would allow his Insurer to repudiate any claim he makes for indemnity.

So again, in summary - once somebody else's Insurer and not your own is involved, realise that any claim that you have to recover your loss is not against any Insurer but against that somebody and take competent legal advice as to how you should proceed.

This is not the sort of case in which the Ombudsman can give practical assistance, or take up with the Insurer on your behalf - he can only give the sort of general advice which is contained in this Memorandum.