Basically, this means that the liability insurer’s right of limitation is dependent on
and pre-conditioned by the assured’s entitlement to limit; in other words, the liability
insurer would be prevented from invoking limitation if his assured himself is barred
from that privilege. In essence, if the assured is deprived of the right to limit, so is the
fate suffered by the insurer, namely, loss of the corresponding right. The merits of
this viewpoint are strengthened by a reasoned appreciation of Article 1(6) pursuant
to which the insurer is not entitled to limit his liability as per Articles 1(1) and (4), but
is simply entitled to enjoy the “benefits” of limitation to the same extent as the
assured himself. It is noteworthy that Article 1(4) which is incidental to our discussion, provides for the right of any person for whose act, neglect or default, the
shipowner is responsible, to avail himself of limitation under the Convention. It is
the view of some authors that such “right to limit liability is parasitic on the
shipowner”.
33 This is being mentioned simply to highlight the use of the term
“parasitic” in the connotation in which it is used in this article. But there are others
of a contrary view who postulate that the right of limitation made available to a
person as referred to in Article 1(4), is not parasitic but rather is independent of the
shipowner’s right to limit.
34
In terms of English law, the legal position can be gleaned from section 1(1) of the
Third Party (Rights Against Insurers) Act, 1930 which provides for a transfer of
rights from the assured to a third party who has suffered a wrongful act perpetrated
by the assured wrongdoer. Thus, in effect, a third party can proceed directly against
the liability insurer so long as all the conditions in the said section 1(1) are met.
Essentially, however, it must first be established that the insured has incurred a
liability towards the third party in respect of which the assured is entitled to be
indemnified by the insurer.
35 The net effect of section 1(1) of the Act of 1930 is that a
third party who has suffered loss, damage or injury is afforded a statutory assignment
of assured’s rights under his policy to enable him to bring an action against the
insurer in the same manner as the assured would have. As provided in section 1(4) of
the legislation, the insurer is subject to the same liability vis a vis the third party as
the assured himself.
36 It is notable in this context that this legislation has been
repealed and replaced by an Act of the same name enacted in 2010.
37 In that
sense, it can be said that a third party in the position of an unsatisfied creditor of
the assured, steps into the latter’s shoes” and becomes subrogated to his rights
against the insurer, although it must be recognised that any such right would be
subject to the terms of the policy or any applicable legislation such as the Marine
Insurance Act 1906. Thus, there would be no subrogated right in favour of the third
33 Meeson and Kimbell (2011), supra note 3, p. 301.
34 Hodges and Hill (2001), supra, note 32, pp. 531–532.
35 Id. pp. 533–534.
36 Id. pp. 537–538.
37 Meeson and Kimbell (2011), supra, note 3, p. 302.
Liability Insurer’s Right to Limit Liability for Maritime Claims:. . .
663
and pre-conditioned by the assured’s entitlement to limit; in other words, the liability
insurer would be prevented from invoking limitation if his assured himself is barred
from that privilege. In essence, if the assured is deprived of the right to limit, so is the
fate suffered by the insurer, namely, loss of the corresponding right. The merits of
this viewpoint are strengthened by a reasoned appreciation of Article 1(6) pursuant
to which the insurer is not entitled to limit his liability as per Articles 1(1) and (4), but
is simply entitled to enjoy the “benefits” of limitation to the same extent as the
assured himself. It is noteworthy that Article 1(4) which is incidental to our discussion, provides for the right of any person for whose act, neglect or default, the
shipowner is responsible, to avail himself of limitation under the Convention. It is
the view of some authors that such “right to limit liability is parasitic on the
shipowner”.
33 This is being mentioned simply to highlight the use of the term
“parasitic” in the connotation in which it is used in this article. But there are others
of a contrary view who postulate that the right of limitation made available to a
person as referred to in Article 1(4), is not parasitic but rather is independent of the
shipowner’s right to limit.
34
In terms of English law, the legal position can be gleaned from section 1(1) of the
Third Party (Rights Against Insurers) Act, 1930 which provides for a transfer of
rights from the assured to a third party who has suffered a wrongful act perpetrated
by the assured wrongdoer. Thus, in effect, a third party can proceed directly against
the liability insurer so long as all the conditions in the said section 1(1) are met.
Essentially, however, it must first be established that the insured has incurred a
liability towards the third party in respect of which the assured is entitled to be
indemnified by the insurer.
35 The net effect of section 1(1) of the Act of 1930 is that a
third party who has suffered loss, damage or injury is afforded a statutory assignment
of assured’s rights under his policy to enable him to bring an action against the
insurer in the same manner as the assured would have. As provided in section 1(4) of
the legislation, the insurer is subject to the same liability vis a vis the third party as
the assured himself.
36 It is notable in this context that this legislation has been
repealed and replaced by an Act of the same name enacted in 2010.
37 In that
sense, it can be said that a third party in the position of an unsatisfied creditor of
the assured, steps into the latter’s shoes” and becomes subrogated to his rights
against the insurer, although it must be recognised that any such right would be
subject to the terms of the policy or any applicable legislation such as the Marine
Insurance Act 1906. Thus, there would be no subrogated right in favour of the third
33 Meeson and Kimbell (2011), supra note 3, p. 301.
34 Hodges and Hill (2001), supra, note 32, pp. 531–532.
35 Id. pp. 533–534.
36 Id. pp. 537–538.
37 Meeson and Kimbell (2011), supra, note 3, p. 302.
Liability Insurer’s Right to Limit Liability for Maritime Claims:. . .
663