Insurance Institute of London

ASG 228

Professional Indemnity Insurance

Legal Background

by

Derek Tadiello

11 September 2001

“The one great principle of the English law is to make business for itself”

(Charles Dickens: Bleak House)

Areas covered

• contract

• tort

• concurrent duties in contract & tort

• claims by non-contracting parties

• standard of care

• damages

• limitation

• exclusion clauses

• contributory negligence

• failure to mitigate

• novus actus interveniens

• remoteness

• betterment

Limits on recovery

Contract

• deeds & simple contracts

• 3 basic elements– offer and acceptance– an intention to be legally bound– consideration (except deeds)

• form - written, oral or mixture

• express and implied terms

Tort

• 4 requirements– existence of a duty of care– a breach of that duty– damage caused by the breach– foreseeability

Cases

• Donoghue v Stevenson 1932• Hedley Byrne v Heller 1964• Dutton v Bognor Regis UDC 1972• Anns v LB of Merton 1978• Junior Books v Veitchi 1982• Peabody v Sir Lindsay Parkinson 1985• D&F Estates v Church Commissioners 1989• Murphy v Brentwood DC 1991

• Ross v Caunters 1979

• White v Jones 1993

• Arbuthnott v Fagan & Feltrim 1994/ Henderson v Merrett 1995

Concurrent duties in contract and tort

• Midland Bank v Hett Stubbs & Kemp 1979

• Tai Hing Cotton Mill v Liu Chong Bank 1986

• Lancashire Churches v Howard Seddon 1991

• Henderson v Merrett 1994

• Wessex RHA v HLM Design 1994

• Holt v Payne Skillington 1995

Claims by non-contracting parties• St Martins v Sir Robert McAlpine 1993

• Darlington BC v Wiltshier 1995

• Panatown v Alfred McAlpine 2000

• Baxall Securities v Sheard Walshaw 2000

Contracts (Rights of Third Parties Act (1999)

• statutory exception to rule of privity of contract

• applies to contracts entered into after May 2000

• enables a third party to enforce the terms of a contract to which it is not a party if:– contract states he may do so, or– contract purports to confer a benefit on him

Standard of care• Bolam v Friern Hospital 1957

• Whitehouse v Jordan 1981

• Wilsher v Essex Area HA 1988

• Bolitho v City & Hackney HA 1997

• Gloucester HA v Torpy 1997

• Matrix-Securities v Theodore Goddard 1997

• Balamoan v Holden 1999

• David Bond v Sun Alliance 2001

Damages• Contract & tort

• pecuniary and non-pecuniary

• must be reasonable as between parties

• Ruxley v Forsyth 1995

• inconvenience, discomfort & distress

• Bailey v Bullock, 1950 Perry v Sidney Phillips 1982, Watts v Morrow 1991

• Hartle v Laceys 1999

• Farley v Skinner 2000

Limitation periods

• Personal injury - 3 years

• contract - 6 or 12 years from breach

• tort – 6 years from damage, or if later– 3 years from discovery or reasonable

discoverability– cut-off 15 years from last act of negligence

Deliberate concealment• S32(1)(b) “where any fact….is deliberately

concealed…by the defendant, the limitation period runs from the date the claimant discovered or could have discovered the concealment”

• S32(2) “a deliberate commission of a breach of professional duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty”

• Brocklesby v Armitage 1999

• Liverpool RC v David Goldberg QC

• Cave v Robinson Jarvis & Rolfe 2001

Contributory Negligence

• Law Reform (Contributory Negligence) Act 1945

• Basildon DC v J E Lesser Properties 1985

• Forsikringsaktieselskapet Vesta v Butcher 1986

• Barclays Bank v Fairclough 1995

• Failure to mitigate

• Novus Actus Interveniens

• Remoteness– Hadley v Baxendale 1854– Victoria Laundry v Newnam 1949– The Heron II 1969– Parsons v Uttley Ingham 1978

Betterment• Philips v Ward 1956

• Harbutt’s Plasticene v Wayne Tank 1970

• Richard Roberts v Douglas Smith Stimson 1989

• Victoria University v Hugh Wilson 1985

• Imperial College v Norman & Dawbarn 1986

Civil Liability (Contribution) Act 1978

• Where two or more wrongdoers are responsible for the same damage, the Court may apportion damages between them on a just and equitable basis

• liability of parties may be breach of contract, statute or in tort.