Commentary - PL must be seen through insureds' eyes

In two recent cases on the interpretation of public liability policies brought under the Third Parti...

In two recent cases on the interpretation of public liability policies brought under the Third Parties (Rights against Insurers) Act 1930, the courts have confirmed that such policies must be interpreted from the insured's perspective: the state of mind of individuals who commit assaults in the course of employment cannot be attributed to their employer.

In Hawley v Luminar Leisure and others (2006), a doorman employed by a security company (ASE) and hired by nightclub Luminar assaulted and injured a customer. The customer sued both Luminar and ASE, which had gone into liquidation but benefited from a policy of insurance.

After judgement was entered against ASE, its insurers refused to indemnify under the Act. The Court of Appeal confirmed that the words 'accidental bodily injury' have to be considered from ASE's perspective. The perpetrator's state of mind cannot be attributed to its employer and the injuries were indeed 'accidental' within the meaning of the policy issued to ASE.

In KR and others v Royal and Sun Alliance (2006), the claimants were physically and sexually abused by employees of a company running children's care homes. The company was found to be negligent for its systemic failure to protect the children from abuse.

The claimants sought an indemnity from the company's insurers under the Act. The insurers relied on a clause in the policy excluding liability for loss resulting from deliberate acts or omissions of the insured.

The court found that the deliberate acts or omissions were those of the abusers and not of the company; therefore, the insurers could not benefit from the exception in the policy.

Even after the clause was extended in 1981 to cover the deliberate acts or omissions of directors and managerial employees of the insured, the acts of abuse could not be attributed to the company as the abusers were acting not in a managerial role but for their own selfish ends. Genevieve Rich, BLM London

These law reports are contributed by insurance law firm Berrymans Lace Mawer (http://www.blm-law.com).

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