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Can the insurance company be sued for loss suffered?
Since the accident, my sister has heard nothing from the owners of the vehicle as well as the insurance company. Can my sister sue the insurance company to claim damages for her injuries and loss suffered?
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Nathan Asare, Kumasi
Dear Nathan, there is a well-known principle of the Common Law which bears close resemblance with the scenario narrated by you. I will apply that principle and then the prevailing Ghana law on the issue.
Under Common Law only persons who are parties to a contract can sue or be sued on the contract. This is known as Privity of Contract or third party contractual rights or by the Latin expression “jus quaesitum tertio”.
This principle has been stated time and again by the English and Ghanaian courts in various celebrated cases. For example, in the English case of Dunlop Pneumatic Tyre Co. v. Selfridge and Co. Ltd. [1915] A.C. 847 at 853, H.L. Lord Haldane called it an 'elementary' principle in English law that only a person who is a party to a contract can sue upon it and that 'our law’ knows nothing of a jus quaesitum tertio arising by way of contract’.
Further Viscount Simonds in reading his judgment in Scruttons Ltd. v. Midland Silicones Ltd. [1962] A.C. 446 at 473, H.L observed as follows:
"Although I may regret it, I find it impossible to deny the existence of the general rule that a stranger to a contract cannot in a question with either of the contracting parties take advantage of provisions of the contract, even where it is clear from the contract that some provision in it was intended to benefit him. That rule appears to have crystallized a century ago . . . and finally established in this House . . . There are, it is true, certain well-established exceptions to that rule though I am not sure that they are really exceptions and do not arise from other principles."
In Ghana, the case of Baidoo v Sam [1987-88] 2 GLR 666, CA posed this question: “Can a stranger to this transaction ask a court of law for rescission of such an agreement? Is it the legal position that a person with an interest admittedly conceded by all to exist can for the reasons advanced by the plaintiff be prevented by the judicial process from assigning his interest?
In answering this question, the court stated: “In my opinion, the plaintiff, Ellion Baidoo, who is the appellant in this case, is not entitled to sue on a contract of sale when he was not a party to that contract, and since the reliefs he seeks are all founded on the said contract, his action must necessarily fail.”
Despite the provisions of the Common Law as stated in the cases above, the other important legal proposition which must not be lost sight of is where domestic legislation has made changes to the Common Law principles, the domestic legislation will have precedence.
The Contract Act of Ghana, Act 25 came into force in 1960. Section 5 of that Act provided that any provision in a contract which purports to confer a benefit on a person who is not a party to the contract, whether as a designated person or as a member of a class of persons, may, subject to the provisions of this Part, be enforced or relied upon by that person as though he were a party to the contract.
In effect in Ghana, where two parties enter into a contract and imposed a benefit on a third party, that third party can sue as if he were a party to the contract. Ghana therefore has departed slightly from the English principle of third party contractual rights.
Based on the current Ghana law, the Insurance Company and the vehicle owner entered into a contract for the vehicle owner to pay yearly premium so that in event of an accident and a third party is injured, that third party can be compensated in damages by the insurance company.
The third person though not a party to the contract, it is clear that the parties intended to confer a benefit on the third party. In the scenario painted by you, your sister is a third party to the insurance contract between the Insurance Company and the vehicle owner.
The accident which occurred and the injuries suffered by your sister are to be compensated for by the insurance company. If it fails, your sister who is a beneficiary can sue the insurance company unless there is evidence of lapse of the policy or breach of any of the terms by the vehicle owner.
Apart from the principle of Privity which affects third party rights, in motor vehicle insurance, specific legislation has been passed to protect third parties fare-paying passengers and pedestrians who got injured by the negligent acts of vehicle owners or their drivers.
The law on that is the MOTOR VEHICLES (THIRD PARTY INSURANCE) ACT, 1958 which is an Act to make provision for the protection of third parties against risks arising out of the use of motor vehicles.
The Act makes it mandatory and says no person shall use, or cause or permit any other person to use, a motor vehicle unless there is in force in relation to the user of that motor vehicle by such person or such other person, as the case may be, such a policy of insurance or such security in respect of third party risks as complies with the provisions of this Act.
The effect of this is that with the exception of State vehicles, Police and the Armed Forces, no vehicle can ply the roads of Ghana unless the owners have taken risk insurance to protect third parties in event of any injuries arising from the use of the motor vehicle.
My advice to your sister is to proceed to sue the owner of the vehicle and the insurance company or opt to sue the owner alone and if judgement is taken against the owner, it could enforce the judgment against the insurance company.