Insights

On 7 November 2024, the Court of Appeal (Civil, Superior) delivered its final judgment in the case of ‘C.B. v Water Sports Operations Limited et’, which related to a water sports accident that occurred in July 2007. While the Court of Appeal delved into a number of legal principles, the purpose of this law report will be to analyse the Court of Appeal’s conclusions reached in respect of an insurance policy entered into between a local insurance agent (hereinafter “MIAL”) and the defendant company.

Facts of the case

On 25 July 2007, the plaintiff’s husband had decided to participate in a water-sports activity while on holiday in Malta, which led to him suffering severe, permanent injuries. In fact, as a result of the accident, the plaintiff’s husband ended up paralysed, with no possibility whatsoever of carrying out any form of future economic activity. The plaintiff blamed the accident on negligence, lack of experience, carelessness, lack of attention and failure of the defendant to abide by the relevant regulations. Meanwhile, the defendant requested that the insurance agent MIAL, from whom the defendant had purchased its insurance policy in connection with the water-sports activities carried out by the defendant, be brought into the case as a joinder (‘kjamat in kawza’). The Civil Court noted that the plaintiff had notified MIAL of the proceedings by means of a judicial act in terms of article 10(2)(a) of the Motor Vehicles Insurance (Third-Party Risks) Ordinance (Chapter 104 of the laws of Malta) (the “Ordinance”). The Civil Court noted that MIAL had been brought into the case as a joinder by the defendant (i.e. the insured) and that there was no doubt that a legal relationship indeed existed between the defendant and MIAL, and that accordingly any claims by MIAL that it should not held liable due to the absence of a legal relationship cannot be accepted.

MIAL claimed that: (1) it had no legal relationship with the plaintiff and neither was it directly or indirectly involved in causing the accident; and (2) that while MIAL had indeed sold an insurance policy to the defendant in respect of the water-sports activities conducted by the defendant, the policy contains ‘limits of indemnity’ and that therefore the insurer should not be held liable to pay for an amount exceeding the limits of indemnity stated in the insurance policy.

The Civil Court referred to the policy wording which stated the following: ‘[…] this policy is extended to indemnify the insured […] against legal liability to pay for third party bodily injury or property damage arising from the ownership, possession or use of the water-sports equipment detailed below when used for the water-sports activities of the insured anywhere in the Maltese Islands […]’. The Civil Court furthermore noted that the speedboat utilised on the day of the accident was itself covered by, and specifically referred to in the insurance policy issued by MIAL.

After taking into consideration the facts of the case and the claims made by the parties, the Civil Court (i.e. the court of first instance) ruled that the defendant and MIAL, as well as the speedboat driver employed by the defendant, were to be held jointly and severally liable (i.e. in solidum) to settle the damages quantified by the Civil Court (which amounted to €920,000).

Considerations of the Court of Appeal

MIAL appealed the decision of the Civil Court, emphasising inter alia, that: (1) there was no legal relationship between MIAL and the plaintiff and that therefore it was not possible for MIAL to be held responsible for damages caused to third parties; and (2) that the insurance policy issued to the defendant contained “limits of indemnity”. MIAL referred to the Civil Code and claimed that a legal relationship would arise in the case of contract, quasi-contract, tort and quasi-tort, and emphasised that it had not made any contact whatsoever with the plaintiff prior to the water-sports accident and that hence there was no legal relationship between MIAL and the plaintiff. MIAL furthermore pointed out that the Civil Court (i.e. the court of first instance) had incorrectly applied the provisions of the Motor Vehicles Insurance (Third-Party Risks) Ordinance (the “Ordinance”), to the case in question, and that while the provisions of said Ordinance do indeed grant the right to third parties to bring a claim not only against the person causing the damage/accident but also against the insurer of the vehicle involved, the Ordinance is not equally applicable to accidents caused by boats and vessels. MIAL furthermore submitted to the Court of Appeal that while the Commercial Vessels Regulations (subsidiary legislation 499.23) (the “Regulations”) imposed a requirement for vessels to be in possession of a valid insurance policy, said Regulations do not permit actions being brought by a third-party against an insurer (as is the case under the Ordinance), since the contractual relationship is res inter alios acta (i.e. strictly between the parties – in this context, the insurer and the insured). The Court of Appeal also noted that the Small Ships Regulations (subsidiary legislation 499.52) would, today, also be applicable.

The Court of Appeal noted that upon receipt of premium by MIAL from the defendant, MIAL had essentially bound itself to insure the defendant against any losses that may arise and that fell within the scope of the insurance policy (and, in return, to generate a profit from the premiums earned from the defendant), but that MIAL had not entered into the insurance policy with the intention of indemnifying third parties such as the plaintiff.

On the basis of the reasoning outlined above, the Court of Appeal (Civil, Superior) accepted the appeal brought by MIAL and confirmed that MIAL shall not be held liable or accountable to make good for any damages incurred by the plaintiff in connection with the water-sports accident.

Disclaimer: Ganado Advocates is responsible for contributing this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report. This article was first published in  ‘The Malta Independent’ on 05/02/2025.