The Driver Always Pays!
Page 62
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By Our Legal Adviser
THE decision of the House of Lords in the case of Lister v. Romford Ice and Cold Storage Co., Ltd. (The Commercial Motor. December 28, 1956), deals with several fundamental aspects of the relationship of master and servant, and so anomalous in certain respects are the results of the decision that they are worth careful study by employers generally. They are also vital to drivers and although few of them are likely to have the case brought to their notice, any conscientious employer Would probably feel morally bound to do so.
The facts of the case were comparatively simple compared with the legal problems which emerged. While backing his lorry in a yard the driver negligently ran into and injured his own father, who was also in the same employment. The father promptly sued the employers— who were, of course, liable for their driver's acts done in the course of his employment—and recovered damages of £1,600. The employers had taken out the appropriate third-party insurance, which excluded liability for the death of, or injury to, someone in their employment in the course of that employment. That they were entitled to do under the proviso to Section 36 (1) of the Road Traffic Act, 1930, which specifically exempts such risks from " compulsory " third-party insurance.
Tn addition, the employers had adopted the sensible precaution of taking out a separate policy in respect of their liability as employers. In pursuance of the latter policy the damages and costs of the action were paid on their behalf by their insurers. Then the insurers brought an action in the employers' name—as they were entitled to do under a clause which appears in almost every such contract of insurance—to recoup themselves by way of indemnity from the unfortunate driver to the tune of £1,600. plus costs Right to Recover . It has been clear law for some time that an employer is .entitled to recover from his own employee any damages which the latter's negligence has .forced him. to pay out. There have been several cases of this kind in recent years. This right of the employer stems from the implied term of the contract of service whereby the employee undertakes to take reasonable care of his master's property and generally in the performance of his duties. What made the position peculiar in the Lister case was the insurance effected by the employers.
Equally; there is an implied term in law that an employer will not require his employee to do anything unlawful in the course of his work. It has been held that this includes the Asumption that the employer will make himself entirely responsible for the duty of effecting the necessary compulsory third party insurances for his vehicles. In the present case there was also what is known as a "third-party extension" to the insurance policy, which gave the driver also a right to indemnity from the insurers if he became liable to a third-party claim.
The unfortunate driver — unfortunate because, although he was to blame for the whole affair, he was nonetheless a working man whose resources could not possibly meet the damages involved and who undoubtedly, if he had given the matter any thought at all, would have assumed that the insurance policy of his employers would have ended the matter—having had judgment given against him in favour of the employers, proceeded to appeal.
An argument advanced on his behalf found favour with one judge in the Court of Appeal, where his appeal was dismissed by a two to one majority, and with two law lords in the Lords, where his further appeal was dismissed by a three to two majority. This submission was based upon terms which it was suggested must be implied in law in every similar contract of employment. I have already mentioned two such implied terms—one in favour of the employers and one in favour of the employee—and there are several others which are recognized in law.
It was urged that one such implied term was that-he was entitled to be indemnified by his employers against any claim arising from any act done by him in the course of his employment. This—hardly surprisingly— found no favour, and clearly was an untenable argument. It was also urged—and this seemed more reasonable— that he should be entitled to the benefit of any insurance which his employers had effected.
Unwilling Plaintiffs The extraordinary position into which the Road Traffic Act had driven the law is shown by the fact that the employers were most unwilling plaintiffs in whose name the insurers were proceeding, also by a strange anomaly arising out of the existence of the "third-party extension" clause in the policy. As a result of this clause, if the injured father had sued the son direct— as any plaintiff is entitled to sue the driver, either instead of, or in addition to, his employer—the son could have called on the insurance company to pay the damages and costs and the latter would have had no right to reimbursement from him.
On the other hand, by suing the employers the position of the driver was much worse, because the insurers could force the employers to take action to be. indemnified, whereas the position of the insurers—who had pocketed the premiums against their risks—was better.
The upshot of this decision—for the majority in the Lords, whilst regretting the anomalies caused, considered even worse would result from a different decision—is that no driver employee is safe for a moment without a separate insurance policy on his own behalf. It is impossible to tell if a third party will sue the driver or the employer—the choice is his or his legal advisers—but in the vast majority of eases it is the employer who is sued, because the driver is rarely worth powder and shot.
Accordingly, wherever this course is taken by the injured party and despite a third-party extension clause in favour of the driver negotiated and paid for on his behalf by his employers, the driver is liable to be saddled with a heavy claim for damages for a large part of his • working life.
This is a possibility that employers must point out to their drivers. I doubt whether this situation will make drivers more careful—it will tend either to make them more careworn with such a fear before them, or to force them into other employment.