The High Court has ordered insurers defending a claim by Allied Irish Banks plc to identify the specific passages of a 61-page report on which they intend to rely, while refusing most of the bank’s requests for further particulars of their defence.
Mr Justice Denis McDonald delivered the ruling on 29 November 2018 in Commercial Court proceedings concerning an insurance policy issued in 2002. AIB claims it is entitled to cover for losses linked to fraudulent foreign-exchange trading by John Rusnak, a former employee of its US subsidiary, AllFirst. The insurers deny that the losses are covered. The underlying insurance claim was not decided in this application.
AIB sought particulars before delivering its reply to the defence. The judge said the insured bears the burden of proving that its losses fall within the policy’s insuring clause. A defendant may deny or not admit allegations that the plaintiff must prove without being required to explain that position. He rejected AIB’s argument that the Commercial Court’s case-management procedures removed that right.
Applying that approach, the judge refused requests for particulars of several pleas, including that the losses were not covered and that the transactions amounted to trading. He said those pleas, considered in context, put AIB to proof of its case. The court made no finding on how the policy should be interpreted or whether the losses qualify for cover.
A separate defence paragraph reserved the insurers’ position under a policy condition that could terminate cover for an employee if specified people at the bank knew of dishonesty. The insurers’ counsel accepted that the paragraph did not currently make an allegation against AIB and that the insurers could not proceed to trial on the reservation alone. The judge ruled that any future positive defence on this basis would require an application to amend the pleadings, with material facts and particulars. He declined to order particulars of the reservation at this stage.
The court did require more detail about the insurers’ proposed reliance on the Ludwig Report, a review of Rusnak’s activities. The judge found that the insurers’ general references to the report and its control deficiencies did not identify what they intended to use. They must provide precise report passages, with page references, before AIB delivers its reply.
The application was otherwise refused. The judge’s initial view was that costs should be costs in the cause, subject to hearing the parties. He said the judgment and same order would also apply in three related proceedings.