Is the Employment Tribunal a Court? Insurers can be named in Employment Tribunal proceedings in place of insolvent insureds

Is the Employment Tribunal a Court? Insurers can be named in Employment Tribunal proceedings in place of insolvent insureds's Tags

Tags related to this article

Is the Employment Tribunal a Court? Insurers can be named in Employment Tribunal proceedings in place of insolvent insureds

Published 2 febrero 2021

The Court of Appeal has held that the meaning of “court” in the context of Third Parties (Rights against Insurers) Act 2010 (“the Act”) includes an Employment Tribunal (“Tribunal”).  This means that tribunals have jurisdiction to hear a claim brought by a third party against an insurer under the Act.

Third parties rights against insurers

The Act removes the need for multiple sets of proceedings by allowing a third party to issue proceedings directly against a liability insurer where the insured is or becomes insolvent, and to resolve all issues (including the insured’s liability) within those proceedings.  By removing the need for the third party to sue the insured, the Act eliminates the hurdle of restoring a corporate insured to the register of companies where it has been struck off.

The Act also improves a third party’s access to information about the insurance policy, allowing them at an early stage to obtain information about the rights transferred in order to enable an informed decision to be taken about whether or not to commence or continue litigation.  The Act also widens the category of people who can be asked for the information and places time limits on their response.

Irwell Insurance Co Ltd v Watson and others [2021] EWCA Civ 67

This case related to an employee, Mr Watson, resigning from his position with his employer, Hemingway Design Limited (Hemingway”).  Hemingway held an insurance policy with Irwell Insurance which covered liability for claims brought against it at tribunal.  In April 2017 Mr Watson brought a claim against Hemingway for unfair constructive dismissal and disability discrimination.  Shortly after, Hemingway entered into creditors’ voluntary liquidation. Mr Watson then applied to join Irwell Insurance to the employment proceedings pursuant to the Act.

In the first instance, the tribunal judged that it did not have jurisdiction to hear the claim as the issues related to a contract of insurance and there was no contractual or employment relationship in existence between the parties.  Mr Watson appealed to the Employment Appeal Tribunal (“EAT”) which allowed the appeal.  The EAT held that under the 2010 Act, the employer’s rights under the insurance policy were transferred to Mr Watson which, in turn, allowed him to sue Irwell Insurance without bringing separate proceedings.  The EAT decided that a tribunal was a “court” under the 2010 Act and so it had jurisdiction to declare Irwell Insurance as being liable to Mr Watson.

Irwell Insurance appealed to Court of Appeal.  The Court dismissed the appeal and confirmed the EAT’s decision that a Tribunal was a “court” within the meaning of the Act.  It held that if the third party was prevented from bringing proceedings against the insurer, it would invalidate the purpose of the Act in avoiding the need for two sets of proceedings.  The Court also held that Tribunals are regularly asked to deal with questions of law spanning a range of topics and this might include insurance law questions.  In doing so, the Court of Appeal rejected Irwell Insurance’s submissions that Parliament had never intended for the Tribunal to deal with such insurance cases.

Practical considerations

The decision in Irwell confirms that insurers can be named as respondents in employment proceedings.  Some practical considerations are:

  • Since employment tribunal fees were abolished in 2017, there has been a year on year increase in employment tribunal claims. The Irwell case confirms that insurers can be joined into employment tribunal proceedings under the Act. Insurers need to aware claims under the Act are not limited solely to traditional civil court claims.
  • Although many policies will contain insolvencies exclusions, they usually only apply to wrongful acts after the date of insolvency. Any wrongful acts, such as those that lead to employment claims, pre-dating the insolvency will usually fall for cover.
  • Witness evidence is fundamental in employment claims. Where a company has become insolvent and there are no longer employees available to provide evidence on the issues in dispute, this will invariably have a negative impact on the prospects of defending the claim.
  • Equally as important where a company is no longer trading (or under the control or administrators/liquidators) is ensuring that insurers have access to relevant documents and ensuring that documents are preserved. If there are issues in obtaining relevant documents this can result in the failure to meet tribunal deadlines and may impact the prospects of defending the claim.
  • The above issues may also impact the ability of insurers to engage in the ACAS Early Conciliation process or settlement discussions.

Authors

Graham Briggs

Graham Briggs

Bristol

+44(0)117 918 2712

Anjali Sharma

Anjali Sharma

Leeds

+44(0)113 251 4963

< Back to articles