Mulchrone v Swiss Life (UK) Plc

For purposes of the Contracts (Rights of Third Parties) Act 1999, the relevant contract is the contract under which the insured risk occurred and the third-party cause of action accrued. Where disablement begins during the currency of an insurance policy, the cause of action remains governed by that policy even if the deferment period expires, or the insurer’s alleged breach occurs, after termination or renewal. The later issue of corrected policy documents or a minor contractual variation does not ordinarily create a fresh contract for the purposes of the Act. A renewal involving administration and recalculation of premiums, without a fresh underwriting decision or new bargain, is not necessarily a new contract. A third party therefore cannot rely on a later policy merely because it was in force when benefits ceased or when the cause of action became enforceable.

Christina Mulchrone, an employee of Norton Rose, was a beneficiary of group income protection insurance provided by Swiss Life to Norton Rose. Her disablement began on 11 May 2000, and the 26-week deferment period ended on 9 November 2000. Swiss Life initially paid benefits but stopped them from 31 January 2002.

Swiss Life declined to arbitrate with Mulchrone, contending that the insurance contract pre-dated the commencement of the Contracts (Rights of Third Parties) Act 1999. Mulchrone sought declarations enabling her to enforce the arbitration agreement in her own name. The central issue was whether the cause of action arose under a contract entered into after 11 May 2000.

1. The claim was dismissed. The claimant was not entitled under the Contracts (Rights of Third Parties) Act 1999 to institute arbitration proceedings against Swiss Life.

2. The insurance contract was unconditionally and permanently concluded on 19 January 2000. The material supplied after Swiss Life agreed to assume risk concerned form, administration and the extent of individual cover. It did not make the original contract provisional. Alternatively, if the contract had been temporary, a permanent contract was concluded when the policy documentation was issued on 10 March 2000.

3. The corrected policy Table issued on 31 August 2000 did not constitute a fresh contract. It corrected the renewal date and made, at most, a minor alteration to the benefit escalation rate. Parliament had not intended an amendment of that nature to amount to entering into a new contract for the purposes of the Act. The contractual rights and obligations were recorded in the later policy document, but the contract itself had been entered into earlier.

4. The court considered that the October 2000 event was not a renewal involving a new contract. The policy contemplated premium calculation for a further policy year under continuing cover, without a fresh discretion to accept or decline the risk. The October 2001 renewal, involving a rate review, a new unit rate and an express decision to remain insured, was redolent of a fresh contract, but that did not assist the claimant.

5. The cause of action accrued under the policy covering the claimant when disablement began and the deferment period commenced. The policy’s termination provisions preserved continuing payments and the accrual of benefits where disablement had begun before termination. Expiry of the deferment period was not the relevant date for identifying the governing contract.

6. Accordingly, neither the October 2000 event nor the October 2001 contract governed liability for the claimant’s disablement. A contract made after Swiss Life’s liability had begun could not become the contract under which that liability accrued merely because it was in force when benefits ceased or when an alleged breach occurred.