DMC Category Rating: Developed

This case note is based on an Article in the February 2006 Edition of the ‘(Re)insurance Bulletin’, published by the Insurance/Reinsurance teams at the international firm of lawyers, DLA Piper Rudnick Gray Cary. DLA Piper is an International Contributor to this website

Background
By contract dated November 1996, ASE Security Services Ltd agreed to provide Luminar Leisure Ltd with doormen for Luminar's nightclub, the Chicago Rock Café in Southend-on-Sea, Essex, UK. One of these was a Jeffery Warren, who worked at the club from 1998. Mr Warren was not registered as a door supervisor under the local authority's scheme, although he led ASE to believe he was.

On 18 August 2000, during an incident outside the club, Mr Warren punched a customer, Mr Hawley, so hard that Mr Hawley suffered permanent and serious brain damage. Mr Warren was convicted of causing grievous bodily harm.

Mr Hawley sued Luminar and ASE on the basis they were vicariously liable for Mr Warren's act. He claimed that they both had negligently failed to train or supervise Mr Warren properly or to check he was properly registered with the local authority and had failed to carry out a proper investigation into whether he was a suitable person to be employed as a doorman.

By this time, however, ASE had gone into liquidation. Consequently, it failed to serve a defence and judgment in default was entered against it in June 2003.

Although ASE had no assets, it did have the benefit of a public liability policy. In addition to pursuing his claim against Luminar, Mr Hawley sought a declaration that he could recover against ASE's public liability insurers under the Third Parties (Rights Against Insurers) Act 1930.

The contract
The contract between Luminar and ASE included a warranty from ASE that its doormen would be thoroughly checked and would be fully trained by ASE to Luminar's standards. ASE also agreed to indemnify Luminar against liabilities arising from the acts or omissions of its doormen and to have in place appropriate insurance cover. The contract specifically stated that doormen provided by ASE "will be employees of the security organisation and nothing in this agreement will be deemed to render any of them employees, agents or partners of Luminar". Attached to the agreement was Luminar's Code of Conduct, which included detailed instructions on how the doormen would carry out their duties.

First instance
There was no dispute that Mr Warren was acting in the course of his employment. The issue was whether Luminar or ASE should be held vicariously liable for his actions. Luminar argued that ASE had been engaged as a specialist independent contractor to provide trained and licensed door staff and that ASE remained Mr Warren's general employer throughout. Insurers' primary submission was that Luminar, not ASE was vicariously liable for Mr Warren.

At first instance, the judge held that, although ASE was strictly speaking Mr Warren's employer, Luminar had sufficient control over the way he carried out his job to be vicariously liable.

A further issue was whether the incident fell within the definition of accidental bodily injury in ASE's public liability insurance, since Mr Warren's action was deliberate. The judge found it did, and granted Mr Hawley a declaration that insurers were liable to indemnify ASE for any liability it was found to have towards Mr Hawley, such amount to be paid to Mr Hawley under the 1930 Act.

On its contribution claim, Luminar argued that ASE had breached its warranty that its employees were suitable people to act as doormen and had failed to check Mr Warren's credentials. This negligence was an effective cause of the damage suffered, therefore ASE should be liable to make a contribution under the Civil Liability (Contribution) Act 1978. The judge, however, assessed ASE's contribution at nil.

Insurers argued that the default judgment against ASE should be set aside as it was inconsistent with the finding of a nil contribution. But the point was raised at the last minute and the judge refused. Both Luminar and ASE's insurers appealed

Luminar now argued that, following the decision in Viasystems (Tyneside) Ltd v Thermal Transfers (Northern) Ltd [2005] EWCA Civ 1151, the court should, at the very least, find it and ASE jointly vicariously liable for Mr Warren.

Judgment
The Court of Appeal disagreed. In cases where an employee is lent, borrowed or transferred, the inquiry should concentrate on the relevant negligent act and then ask whose responsibility it was to prevent it (Mersey Docks and Harbour Board v Coggins & Griffiths (Liverpool) Ltd [1947] AC 1. The issue would depend on the facts of each case.

In Viasystems, a fitter's mate employed by a sub-sub-contractor, but supervised by the sub-contractor, caused extensive damage when he crawled through some sections of ducting. The central question was which of the two employers was entitled and, in theory, obliged, to control the employee's negligent act so as to prevent it. On the facts of that case, both employers were held responsible.

These circumstances were very different. Although under the terms of the agreement, Mr Warren was the employee of ASE, it was clear that doormen were subject to Luminar's Code of Conduct. This was a contract for the provision of labour only; no particularly specialised skills were involved. Although ASE had undertaken to provide door staff who knew how to behave, the evidence showed that the doormen received their instructions from Luminar's club manager. There had effectively been a transfer of control and responsibility from ASE to Luminar.

The answer to the question "who was entitled and in theory obliged to control Mr Warren's act so as to prevent it?" was Luminar. Luminar was, therefore, vicariously responsible for the actions of Mr Warren.

The Court of Appeal also upheld the judge's finding of a nil contribution from ASE. Under the Civil Liability (Contribution) Act 1978, any person liable in respect of any damage suffered by another may recover contribution "from any other person liable in respect of the same damage". The amount of recoverable contribution is such as "may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage in question".

ASE's failure to check Mr Warren's credentials was far removed from the incident itself. Mr Warren had worked at the club for two years under Luminar's direction, during which time nothing occurred to alert ASE to any propensity to violence. There was nothing ASE could have done on that night to control his behaviour.

The Court of Appeal also refused to overturn the judge's decision not to lift the default judgment against ASE. The finding of a nil contribution under the 1978 Act was as between ASE and Luminar and had no impact on the default judgment entered for Mr Hawley against ASE. The application to set aside had been made far too late and the trial had proceeded on the basis there was no issue as to ASE's liability. Even if the result was somewhat bizarre, it was neither appropriate nor in the interests of justice to reopen the issue now.

Accidental bodily injury
ASE's public liability policy covered it against legal liability for damages and reasonable costs and expenses "arising from accidental bodily injury to any person or for accidental loss of or damage to property occurring during the period of insurance". "Accidental" was defined in the schedule as "sudden, unforeseen, fortuitous and identifiable …" and "bodily injury" as "bodily injury, death, illness or disease".

It is a basic rule of insurance law that, in the absence of express terms, a contract of insurance does not cover the insured against a deliberate or wilful act. Could Hr Hawley's injuries be described as accidental when Mr Warren's punch was a deliberate act? The judge decided the question had to be judged from the perspective of the insured, ASE, rather than Mr Warren or Mr Hawley. As far as ASE was concerned, the injury was indeed accidental.

The Court of Appeal agreed. The question of accident or fortuity is generally viewed from the perspective of the insured. Although one would not normally describe what had happened here as accidental, it had to be viewed in context.

The purpose of the policy was to protect ASE against liability, including vicarious liability, arising from the actions or inactions of its security guards. An extension to the policy covered ASE for liability for assault and battery committed by any of its employees in the context of an unlawful physical restraint. This supported the view that it was not the intention of the policy to exclude liability for bodily injury to third parties inflicted by an ASE employee even if the injury was inflicted intentionally. Insurers were, therefore, liable to indemnify ASE for any damages it was held liable to be paid to Mr Hawley.

Back to Top