Smith v Sabre Insurance  CSIH 28Last week, the Scottish appeal court upheld an important decision on res judicata, barring a claimant from seeking to recover his credit hire as it ought to have been included in a previously settled personal injury claim. We consider the decision and wider implications for insurers.
The Inner House of the Court of Session was asked to review the first instance decision of Lord Bannatyne in the case of Mark Smith v Sabre Insurance. The case was a straightforward road traffic accident which occurred in March 2009 and liability was not in dispute. The claimant previously raised and settled a personal injury claim, and it is important to note that the case did not proceed to trial.
The case before the court was for credit hire services, and these had not been included in the initial claim. Lord Bannatyne held that a plea of res judicata - literally "a matter already decided" - had been established and the second claim could not proceed. In England and Wales, the absence of a trial would have precluded such a finding.
Given the potential implications, it is unsurprising that the judgement was appealed, and it was argued that the courts should draw a distinction between insured and uninsured losses. After all, insurers often have no control over the actions of their policy holders who may raise proceedings long before a subrogated claim has crystallised.
The appeal court held, however, that the root cause of each loss was part of the same event - the undisputed road traffic accident - and, importantly concluded that: "...an insurer acting under rights of subrogation or in terms of an express assignation can be in no better position than the insured."
That is a long established principle of subrogation, and whilst the court recognised the practical difficulties involved in dealing with different claims arising out of a single incident, the court has simply re-applied the equally long established principles of res judicata.
The unsuccessful appeal now authoritatively states that all losses arising out of an incident ought to be raised at the same time. It is not restricted to credit hire or personal injury, and includes subrogated and uninsured losses.
As is recognised by the court, the decision may appear unduly harsh. Policy holders are often in greater need of quick compensation for uninsured losses, and can be disinclined to assist insurers who have quite properly declined certain heads of claim under the relevant policy.
It is arguable that appropriate pleading in the first case may thwart a subsequent res judicata plea, if it clearly outlines the existence of separate losses borne by insurers or insured, but this is a dangerous strategy. The language of the decision is quite clearly aimed at a one action rule and any court following this decision will be at pains to follow that.
When asked to defend claims for multiple losses in Scotland, insurers and their solicitors must remain live to this potential knock out blow. When recovering subrogated losses, there must be communication with the insured throughout the process to secure co-operation. After all, uninsured losses can often be minimal and quick to resolve, whereas a complicated subrogated damage and business interruption claim may take months to determine.
Underwriters may also wish to give consideration to policy wording which incorporates a condition which obliges the policy holder not to raise court proceedings without notice or consent.