Control of claims made against wrongdoer

Horwood v Land of Leather Ltd [2010] EWHC 546 (Comm) considers the question whether a prohibition of settlements clause applied not just to claims made against an insured but also claims made by the insured. Teare J has concluded that it does have that effect. The case is discussed by Brendan McGurk of 4 New Square.

Horwood: the facts

The claimants alleged that they had suffered personal injury in the use of sofas purchased from the defendant (the insured). The insured had product liability insurance although had since gone into administration. The claimants were therefore suing under the Third Parties (Rights Against Insurers) Act 1930. The insured sourced the sofas from a third party from whom it (with insurer’s approval) sought compensation for its losses (other than those flowing from the claimants’ personal injuries). Insurers indicated that they would redirect any personal injury claims to the third party. This led to the first agreement which, the court found, required the third party to pay the insured US$900,000 over a reasonable time. The court did not make any findings as to precisely what the first agreement covered. The third party then reneged on the agreement and the parties subsequently renegotiated its terms. The new agreement (“the February settlement”) recorded that the third party would pay the insured US$900,000 in six instalments while the insured would buy US$20m of products from the third party in 2008. The agreement then stated: