An insured who makes a representation in the lead up to litigation which is relied upon by the other side may, in some circumstances, be precluded from denying that the representation was correct. This can have significant consequences for an insured.

The representation might, for example, be as to the correct company to be sued in a group of companies. This can become particularly important where entities are set up as limited companies specifically to ring fence assets or liabilities. It might concern the authority of an agent to accept service of documents on behalf of the insured. It might be over ownership of a building, such as a refinery, from which damaging substances have leaked and caused damage to third party property.

In order to establish an estoppel, the other party will need to show a clear and unequivocal representation. The other party will also need to show reliance on that representation.

In a recent Privy Council decision, the court considered a representation made by a defendant that he was responsible for cattle which had caused a road traffic accident. The claimant relied on this representation to bring proceedings against the defendant, rather than his employer (who was probably vicariously liable for any breach of duty on his part). By the time the case was heard, it was too late to bring proceedings against anyone else, since the applicable limitation period had expired. The court held that the defendant was precluded (estopped) from denying that he was responsible for the cattle.

This case highlights the difficulties which may arise if an insured appears to assume any responsibility on the occurring of an event which could give rise to liability on their part or which could in any other way result in them being precluded from raising a defence at a later date. If this occurs, insurers will want to carefully scrutinise whether the conduct of the insured has breached any applicable claims control or claims co-operation clause.

Further reading: Rambharose v Bovell [2009] UKPC 6

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 09/03/2009.