By Jide Bodede
- Terminology
In liability insurance policies, the most common being the motor vehicle third-party liability insurance, the insurer undertakes to indemnify the insured against third-party claims. The insurer and insured are the first and second parties and the injured or affected party who is the claimant that seeks compensation is the third party. This explanation is important because we have seen counsel confuse the parties in litigation relating to liability insurance claims.
- Introduction
Sometimes, a third-party claimant who brings an action against the insured and knows that the insurer will indemnify the insured for the amount of the judgment may seek to join the insurer as co-defendants so that the judgment may be enforced directly against the insurer. In rare cases, the defendant insured may seek to join the insurer as co-defendants for the same reason. In practice insurers will engage counsel to conduct the defence of litigation by a third-party claimant against an insured and will settle the judgment against the insured but they will reject any attempt to join them directly as co-defendants in the action. We now examine whether a third-party claimant has a legal right to join an insurer as co-defendants in an action against the insured.
- Section 68 Insurance Act 1997
3.1 The now-repealed provisions of section 68 of the Insurance Act 1997 clearly gave a third party claimant the legal right to join an insurer directly in actions against an insured. Section 68(1) of the Insurance Act 1997 stated that “Where a third party is entitled to claim against an insured in respect of a risk insured against, he shall have a right to join the insurer of that risk in an action against the insured in respect of the claim.” The provisions of this section were first enacted by the Insurance (Special Provisions) Decree 1988. In Unity, Life & Fire v Ladega (1996) NWLR (Pt.427) 726, the High Court relying on the above statutory provisions granted an application by the third-party claimant to join the insurer. However, as we shall see later this decision is no longer the current judicial authority.
3.2 The provisions of section 68 of the Insurance Act 1997 which gave third party claimants the legal right to join insurers directly in actions against an insured can no longer be found in the Insurance Act 2003. In effect, they have been impliedly repealed and there no longer exists any legal right for a third-party claimant to join an insurer as a co-defendant in an action against an insured.
- Section 69 Insurance Act 2003
4.1 The provisions of section 69(1)(b) of the Insurance Act 2003 state that, where a judgment is obtained against an insured by a third party claimant, the insurer shall pay the amount of the judgment to the third party entitled to the benefit of such judgment within 30 days, notwithstanding that the insurer may be entitled to avoid or cancel the policy. Section 69 of the Insurance Act 2003 does not give a third party claimant a legal right to join an insurer in claims against the insured. Therefore, there is clearly no longer any statutory authority for the joinder of an insurer in an action by third-party claimants against an insured.
4.2 Section 69(1)(b) of the Insurance Act 2003 is similar to section 10(1) of the Motor Vehicle (Third Party Insurance) Act 1950 and both sections impose a statutory duty on an insurer to settle the amount of any judgment obtained by a third party claimant against an insured. This means that an insurer cannot place a maximum limit of liability for death or personal injury to third parties. Rather, the insurer must settle the claim for the full amount of the judgment obtained against the insured. In Pereira v Motor & General Insurance (1971) NNLR 118, the High Court held that section 10(1) of the Motor Vehicle (Third Party Insurance) Act 1950 imposed a statutory duty and not a contractual liability on the insurer to settle the judgment obtained against the insured.
- Judicial Authority
5.1 Recent judicial authority in Nigeria has leaned against the joinder of an insurer as a co-defendant in action by a third party claimant against an insured. In New India Insurance v Odubanjo (1971) 1 NCLR 365, the Supreme Court held that the third-party claimant did not have the right to join the insurer in an action against the insured because there was no privity of contract between the claimant and the insurer. Again in Mecury Assurance v Ajufo (1978) 11 NSCC 374, the Supreme Court considered this issue. Here it was the insured owner of the vehicle that applied to join the insurer in the action and the insurer was joined as co-defendant at the High Court. On appeal, the Supreme Court relied on the decision in New India Insurance v Odubanjo (supra) and held that it was wrong to join the insurer as a co-defendant in an action brought by the third party claimant because there was no privity of contract between the third party claimant and the insurer.
5.2 In UBA v Achoru (1987) NWLR (Pt.48) 172, the Supreme Court took the same position and held that both the claimant and the insured did not have the legal right to join an insurer as a co-defendant in an action by the third-party claimant. Agbaje JSC clarified the law on this matter,
“It is however clear to me that the plaintiff in an action of this nature can have no claim against the insurers of the defendant (insured). So the insurance company could not have been joined by the plaintiff as a co-defendant in this action.”
See also, The Law of Insurance Contracts in Nigeria by O. Omo-Eboh at pages 428 to 440.
- Third-party procedure
Therefore, it is clear that both current statutory and judicial authority does not give a third party claimant the legal right to join an insurer as co-defendants in an action against the insured. However, where the defendant insured seeks to join the insurer he can do so by way of a third party procedure and join the insurer as a third party but not as a co-defendant. The Supreme Court said obiter in both UBA v Achoru and New India Insurance v Odubanjo, that an insurer can be joined as a Third Party (not a co-defendant) in an action against the insured on the grounds that the insurer has a statutory duty to indemnify the insured for the amount of the judgment.
Jide Bodede LLM(Lond)
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