Insights

On the 30 July 2021, the Court of Appeal (Superior Jurisdiction) (the “Court”), presided over by Chief Justice Mark Chetcuti, Mr. Justice Joseph R. Micallef and Mr. Justice Tonio Mallia considered the applicable prescriptive period of a contractual breach of an insurance policy in light of a motor vehicle accident. The facts of the case in the names of GasanMamo Insurance Limited vs. Mario Seguna, Carmel Seguna and Kevin Debono, were as follows.

In October 2001, a vehicle owned by Mr. Mario Seguna was involved in an accident, and on the 26 March 2010, the Court, in a case instituted by the injured party against Mr. Carmel Seguna and Mr. Kevin Debono, declared that Mr. Carmel Seguna and Mr. Kevin Debono were responsible for the said accident and jointly ordered them to pay damages of over €7,000 to the injured party. In terms of article 10 of the Motor Vehicles Insurance (Third-Party Risks) Ordinance (Cap. 104 of the Laws of Malta) (the “Motor Vehicles Insurance Ordinance”), GasanMamo Insurance Limited (the “Appellant”) paid the injured party over €12,000 in damages and expenses. The Appellant then instituted a case against Mr. Mario Seguna, Mr. Carmel Seguna and Mr. Kevin Debono (the “Respondents”) to claim reimbursement of the damages paid by the Appellant to the injured party. According to the Appellant, at the time of the accident, the Respondents breached the terms and conditions of the motor vehicle insurance policy regarding the vehicle in question.

In March 2016, the First Hall Civil Court declared Mr. Mario Seguna solely responsible to reimburse the Appellant for the damages paid, since the motor vehicle insurance policy was entered into by himself alone. The First Hall Civil Court declared that the case did not concern the responsibility of the accident but related to the contractual relationship between Mr. Mario Seguna and the Appellant, and the failure of Mr. Mario Seguna to abide by his obligations under the motor vehicle insurance policy. At the time of the accident, the vehicle was being driven by Mr. Carmel Seguna and was mounted with cage bars used in horse racing, which were being operated by Mr. Kevin Debono. This was in breach of the terms and conditions of the motor vehicle insurance policy issued by the Appellant regarding the vehicle in question. The list of exceptions to the insurance policy in fact included “any liability arising as a result of the [motor vehicle] being used for racing, pace-making, reliability trial or speed testing, or use for any purpose in connection with the motor trade”. Mr. Mario Seguna lodged an appeal against the decision of the First Hall Civil Court claiming that the case was time-barred and that the exception to the insurance policy referred to by the First Hall Civil Court did not prohibit modifications to the car (which in this case was the mounting of the cage bars) and moreover, the wording of the exception seemed to refer to car racing and not horse racing.

The Court disagreed that the action was prescribed in terms of article 2153 of the Civil Code (Cap. 16 of the Laws of Malta) (the “Civil Code”) which states that “actions for damages not arising from a criminal offence are barred by the lapse of two years”. The Court established that the case related to the contractual relationship between Mr. Mario Seguna and the Appellant (even though it had also been lodged against Mr. Carmel Seguna and Mr. Kevin Debono). The Court referred to a case in the names of Hugh P Zammit noe et noe v. John Mifsud et (1 April 2005) which clarified the three types of relationships which arise as a result of a car accident, namely the relationship between the individuals involved in the accident based on tort, the relationship between the injured party and the insurer which arises by operation of the law in terms of the Motor Vehicles Insurance Ordinance and thirdly, the contractual relationship between the insurer and the insured. The case at hand was examining the third kind of relationship based on the contractual default by Mr. Mario Seguna.

The Court explained that the applicable prescriptive period was that of five years in terms of article 2156(f) of the Civil Code which refers to “actions for the payment of any other debt arising from commercial transactions or other causes”. Mr. Mario Seguna alleged that in such case, the prescriptive period must commence to run from the moment of the breach of contract, although the precise moment is unclear whether it refers to the moment the vehicle was modified and mounted with cage bars, when the vehicle was used for horse racing or when the accident occurred. The Court declared that the case at hand concerned the alleged breach of contract in connection with the accident and with the case instituted by the injured party against Mr. Carmel Seguna and Mr. Kevin Debono, and not as a result of the contractual breach per se. The Court therefore concluded that the prescriptive period commenced to run from the moment the Appellant, as insurer, became aware of the case instituted by the injured party against Mr. Carmel Seguna and Mr. Kevin Debono. The Appellant had been served with a judicial letter regarding the said case, which was dated 7 March 2003. At this moment, the Appellant could have brought a case against the insured, however, the Appellant only officially proceeded against the Respondents Mr. Mario Seguna and Mr. Carmel Seguna by serving them with a judicial letter dated 24 November 2011 requesting them to reimburse the damages paid by the Appellant to the injured party. As a result, the Court determined that in view of the fact that more than five years elapsed between 2003 and 2011, the action was time-barred in terms of article 2156(f) of the Civil Code.

Consequently, the Court did not proceed to examine the facts of the case and set aside the decision of the First Hall Civil Court dated 9 March 2016.

This article was first published in the Malta Independent.