Taking direct action against insurers following a hotel or accommodation accident abroad isn’t as straightforward as it seems, says Chris Deacon.
This article first appeared in New Law Journal and can be viewed here
Following the European Court’s decision in FBTO v Odenbreit  2 All ER (Comm) 733,  All ER (D) 206 (Dec) it has been widely accepted that English holidaymakers enjoy a direct right of action against the insurer of the hotel or accommodation provider, provided such a direct right of action exists under the law which applies to the claim being made. The convenience of this is that it allows holidaymakers to pursue the insurer directly in their home courts rather than having to start a claim in the country where the hotel or insurer is based. While such a direct right of action does not exist under English law for non-road traffic accident claims, by way of example it is recognised and enshrined in statute under both Spanish and French law. Two recent cases illustrate how such claims are not always as straightforward as they might first seem.
In Williams v Mapfre (2015) the claimant, Mrs Williams, brought proceedings in the English court against Mapfre, the Spanish insurer of the Pueblo Hotel, Benidorm, where she sustained an injury allegedly caused by the negligence of the hotel. The insurer challenged the jurisdiction of the English court relying on a clause in the contract of insurance which provided: “Policy coverage shall only include claims submitted within Spanish jurisdiction for events that have taken place in Spain leading to liability or other obligations imposed in accordance with legal provisions in force within the territory of Spain.”
The effect of this clause, if valid, would be to prevent Williams (and any other holidaymaker who sustained injury at the hotel and was looking to the hotel’s insurance policy for redress) from bringing a claim directly against the insurer outside of Spain. In order to determine whether the clause was valid or not the English court had to consider its classification under Spanish law. The English court decided that it was a so-called “definition clause” which defines the extent of the insurer’s liability to indemnify the hotel, rather than an attempt to exclude or restrict the hotel’s rights under the policy of insurance. As a “definition clause” the insurer could rely on it to restrict Williams’ right to pursue her claim outside of Spain and in England. Her only option would be to re-start proceedings in the Spanish courts against the insurer where she could then make her claim against the hotel’s insurance policy.
The decision in Williams does not change the state of the law but provides an insight into how it might operate where a claim is being brought against a Spanish insurer following an accident at a hotel, or indeed where negligence gives rise to a claim for personal injury in any non-road traffic accident scenario, in Spain. Also, this decision is only about Spanish law — the same limitations may not apply under the laws of other countries where a direct right of action exists. The effect of similar clauses in other European insurance contracts will need to be considered carefully in the light of the law which applies to any given claim. Furthermore, the decision does not affect the position following a road traffic accident where claimants enjoy a direct right of action against insurers throughout the EU under the European Motor Insurance Directives.
Shortly after the decision in Williams, the Court of Appeal gave judgment in Mapfre Mutualidad Compania De Seguros Y Reaseguros SA and another v Keefe  EWCA Civ 598,  All ER (D) 213 (Jun).
Mr Keefe sustained a serious brain injury when he was struck by a parasol which had been lifted from its stand by a gust of wind at the Bahia Principe Costa Adeje Hotel in Tenerife. Like Williams, he brought proceedings against the hotel’s liability insurer Mapfre (who accepted the English court’s jurisdiction, presumably because this policy did not contain a “definition clause” like that which thwarted Williams’ attempts at establishing English jurisdiction).
During the initial stages of Keefe’s claim, it became apparent that the limit of indemnity under the hotel’s insurance policy was only approximately 601,000 Euros. Keefe’s claim was worth an estimated £5m and so the insurance policy alone would not provide sufficient compensation. He applied to join the hotel as a party to the English proceedings under Art 11(3) of the Judgments Regulation (Art 13(3) of the Recast Regulation). The hotel challenged jurisdiction on the basis that Art 11(3) only applies to matters relating to insurance and that any claim against the hotel for damages beyond the limit of indemnity under the insurance policy would be a claim in tort for which the hotel must be sued in its home courts in Spain. The hotel’s challenge to jurisdiction was dismissed by the High Court and the Court of Appeal agreed, albeit with slightly different reasoning.
The Court of Appeal found that there did not have to be a dispute regarding the policy of insurance for the hotel to be joined to the existing proceedings against its insurer. It applied a purposive interpretation to the Regulation and in doing so could find no possible justification for limiting the protection afforded to the weaker party in disputes of this nature. If the claimant were required to start separate proceedings against the hotel in Spain to recover damages above the insurance policy limit then this would clearly give rise to a risk of irreconcilable judgments in the same claim which it was desirable to avoid. The Court of Appeal also considered that it did not have a discretion as to whether to accept jurisdiction over the hotel and that if Art 11(3) of the Judgments Regulation (Art 13(3) of the Recast Regulation) were relied on by the claimant then it was bound to accept jurisdiction, thereby giving effect to the objectives of predictability, certainty and protecting the injured claimant who is required to bring the insurance claim as a result of the hotel’s negligence in the first place.
The defendant hotel in Keefe has already indicated an intention to appeal to the Supreme Court and to seek a referral to the CJEU on the basis the Court of Appeal has incorrectly interpreted the Judgments Regulation and the existing case law on irreconcilable judgments where other parties are being joined to an existing action in the courts of another member state that would otherwise not ordinarily have jurisdiction to hear the claim against the additional parties.
On the face of it, Williams and Keefe both had a similar, if not identical, cause of action against the liability insurers of the hotel and the decisions show how, even with the certainty which claimants are supposed to be afforded when it comes to jurisdiction between different EU member states, the underlying facts and documentary evidence (notably the policy of insurance) can lead to a very different outcome.
Keefe’s claim pre-dated the Rome II Regulation so his damages would be assessed under English law in any event provided he could establish English jurisdiction. Following the introduction of the Rome II Regulation, whether Williams elected to bring her case in Spain or England, both courts would be required to apply Spanish law when determining her entitlement to damages. What, then, was to be gained from Williams, or indeed other holidaymakers in a similar position, attempting to pursue a claim in England?
If the English courts have jurisdiction to hear a claim then:
- There is no need to return to the foreign country where the accident occurred to instruct a lawyer and attend court to give evidence and have your entitlement to damages decided;
- English rules of evidence and procedure apply in the English courts which are very often more flexible and favourable to claimants than the rules which apply abroad;
- If the claim is successful then the claimant can recover the legal costs incurred in pursuing the claim from the defendant. This is not possible in Spain where the claimant has to bear the majority, if not all, of their own legal costs.
Hotels regularly welcoming international guests and who have contracts with international tour operators for such purposes may be surprised to find clauses in their contracts of insurance which limit the indemnity provided to claims brought within the courts of the country where the hotel is based. They may also be alarmed at the relatively low levels of indemnity given their potential exposure to claims from guests which may be subject to the more generous assessment of damages under a foreign law. At the same time, hotels welcoming guests from a variety of domiciles can expect to face potential proceedings in a foreign court if things go wrong during the guest’s stay such that they have to take legal action against the hotel and its insurer on returning home (see in particular para.48 of Gloster LJ’s decision in Keefe).
Not all European hotel insurance contracts will contain the same limitations; it is important to obtain a copy of the relevant insurance contract at the earliest opportunity and consider how it might impact on a potential claim. That can be a difficult process and insurers often do not cooperate with such requests, forcing pre-action applications for disclosure.
Of course, one easy way for holidaymakers to avoid arguments of jurisdiction and the fine print of the hotel’s insurance contract would be to book a regulated package holiday with a UK based tour operator from the outset. In such cases, if things go wrong or an accident occurs at the accommodation which forms part of the package holiday then a claim may usually be brought against the tour operator in the English courts.