The Shemaiah Grant Order - Should motor vehicle insurers in the Cayman Islands be concerned?

On 10 January 2025 s.16 of the Children (Amendment) Act 2024 came into force in the Cayman Islands introducing the Shemaiah Grant Order (referred to herein respectively as “s.16” and the “Shemaiah Grant Order”. Section 16 states:

“Order for payments for maintenance and upbringing of child in cases of death of parent due to prescribed criminal acts (“Shemaiah Grant Order”)
16B. Where a court finds a person liable for the death of a parent of a child as a result of the commission of a criminal Act specified in Schedule 1, the court may grant an order against the person or the person’s estate for payments to be made for the maintenance and upbringing of the child (“Shemaiah Grant Order”) —
(a) on application made by a parent or guardian of the child, or by any person in whose favour a residence order is in force with respect to the child or on the court’s own motion; and
(b) having regard to any matters which the court considers relevant in the interests of justice, subject to any conditions as the court considers appropriate, and the payments may be enforced in the same manner, subject to any necessary modifications, as an order for financial relief under this Act.”.

The “criminal acts specified in Schedule 1” of the Act are set out in the that Schedule are as follows: “Criminal acts for which court may grant Shemaiah Grant Order

15B. For the purposes of section 16B, a court may grant a Shemaiah Grant Order in respect of any of the following criminal acts —
(a) causing death by dangerous or reckless driving, under section 75 of the Traffic Act (2023 Revision);
(b) causing death by careless driving or inconsiderate driving, under section 79 of the Traffic Act (2023 Revision);
(c) causing death by driving, where the driver is unlicensed, disqualified or uninsured, under section 80 of the Traffic Act (2023 Revision); or
(d) causing death by driving or being in charge of a vehicle while under the influence of alcohol or drugs, under section 83 of the Traffic Act (2023 Revision).”

Section 16 makes no reference to the obligation of motor vehicle insurers (“Insurers”) in the case of a fatal accident. There is no corresponding amendment to the Vehicle Insurance (Third Party Risks) Act (“The Insurance Act”) which makes reference to s.16.

Motor vehicle insurance policies provide indemnity to the insured in terms which are common to different policies. Typically such indemnity clauses take the following form:

We will indemnify you for, or at our option pay on your behalf, all sums including claimant’s costs and interest which you shall become legally liable to pay with respect to:
The death of or bodily injury to any person; or
.. .

provided that such liability is caused by or arises out of the use of the Motor Vehicle on a road or thoroughfare.

The Question

The question arises whether, where a Shemaiah Grant Order has been made, have the Insurers any “legal liability” to make such payments and, if so, can such liability be avoided by changes to the wording of policies, so that any legal liability arising from such an Order may be avoided?

What “legal liability” is covered? The existing law and the present position on which motor vehicle insurance policies are based.

Liability to the estate and dependents of the victim of a fatal motor vehicle accident is governed in the Cayman Islands by the Torts (Reform) Act (1996 Revision), the relevant provisions of which are as follows.

3. Whenever the death of a person is caused by a wrongful Act, neglect or default, and the Act, neglect or default is such as would (if death had not ensued) have entitled the party injured to maintain an action, and recover damages in respect thereof, then and in every such case the person who would have been liable, if death had not ensued, shall be liable to an action for damages notwithstanding the death of the person injured and although the death has been caused under such circumstances as amount in law to an offence.

The underlined words make clear that an essential element of the liability which insurers are required to cover is fault on the part of the insured – fault in the driving of the insured’s motor vehicle. It is important also to note that the only liability of the insured driver is “to an action for damages”, and not an “application for maintenance” i.e. a Shemaiah Grant Order.

4. (1) Every action brought under section 3 shall be for the benefit of a dependant or dependants of the person whose death has been so caused and shall be brought in the name of his personal representatives; and in every such action the court may give such damages as it thinks proportioned to the injury resulting from such death to the parties respectively for whom and for whose benefit such action is brought; and the amount so recovered after deducting the costs not recovered from the defendant shall be divided among the aforementioned parties in such shares as the court shall find and direct:

This section requires the court to assess the loss to the dependent children resulting from the death of the parent. The Court evaluates on a once and for all basis in financial terms the support that a child would have received from the deceased parent for the period of his or her dependency. This assessment takes into account, (i) the life expectancy of the deceased parent, but for the accident, (ii) the life expectancy of the child, (iii) the likely and future earnings of the deceased parent, (iv) the likely and future sums that would have been provided by the deceased parent to the child for the child’s support maintenance education and leisure. This is an actuarial calculation and is reduced by reason of the accelerated receipt of the calculated amount in one lump sum. This calculated sum is the “value of the dependency”.

By contrast, when assessing maintenance for the purposes of a Shemaiah Grant Order the Court will pay regard to (i) the needs of the child whether or not such needs would have been met by the parent had they survived1, and (ii) the defendant’s ability to provide that maintenance. This is a very different calculation and one that would need to be varied from time to time as the child’s needs and the defendant’s earning capacity change. There is no procedure or even any contemplation of variation of amounts under the Torts (Reform) Act. It is clear on this basis that s.16/Shemaiah Grant Order obligations are not contained within, covered or even contemplated by insurance policies which cover the motorists “legal liability”.

As appears from the Torts (Reform) Act, the basis - and the only basis – for the liability of a motorist is “a wrongful Act, neglect or default” in his driving causing death. Without such, there can be no liability and therefore no liability which a motor insurance policy is called upon to cover. By contrast, no such “wrongful Act, neglect or default” in the driving needs to be shown for there to be made a Shemaiah Grant Order. Such Order may be made to support a child when the feckless parent is not providing and may never have provided such support had they lived. Accordingly, there is no question of calculating and awarding any sum based on “dependency”. This further indicates that the obligations imposed by s.16 and a Shemaiah Grant Order are outside the motor vehicle insurance policy’s “legal liability” cover.

The Torts (Reform) Act requires a court in assessing damages, i.e. the dependency, to take into account contributory negligence on the part of the deceased. Section 8 of the Act states “the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant’s [the deceased’s] share in the responsibility for the damage.” There is no such possibility in the case of an application under s.16. The Court does not and cannot reduce the maintenance of a child by reason of the contributory negligence of the deceased parent. This again indicates that the “legal liability” of the insured covered by a motor insurance policy will not extend indemnity to a Shemaiah Grant Order.

A Shemaiah Grant Order may only be made on proof of a criminal offence. This is the essential requirement for the making of an application. As the title of s.16 itself clearly states “In cases of death of parent due to prescribed criminal acts (“Shemaiah Grant Order”)”. It is the commission of one or more of a set of defined criminal offences which triggers the procedure for obtaining a Shemaiah Grant Order.

It has never been suggested and cannot be suggested that Insurers are liable to pay an insured driver’s fine or other penalty for a driving offence, which is a consequence of a criminal act by the insured. Just as there is no liability under a motor insurance policy for the insurer to indemnify the insured in relation to a fine or other compensation order - there could be no liability upon Insurers to indemnify the insured against the consequences of a Shemaiah Grant Order following upon a criminal act.

In considering whether loss or damages resulting in a claim falls within and is covered by the terms of a policy, the court identifies the proximate cause of the claim and loss. There may be other and subsidiary causes but it is the proximate cause which determines whether there is or there is not liability. In the case of s.16, clearly the proximate cause underlying the right to make a maintenance application is the existence of a criminal act. This is clearly not covered by any motor vehicle insurance policy. Again, any obligation to indemnify in respect of a Shemaiah Grant Order cannot be within the legal liability covered by a motor insurance policy.

Further, as a matter of public policy insurance policies do not and cannot cover criminal acts. If an individual were allowed to insure against the consequences of his crime “those restraints operating on the minds of men against the commission of crimes” would be removed. “Courts will not lend the legal process to enforcing a claim based on the criminal Act of the insured because “no system of jurisprudence can with reason include amongst the rights which it enforces, rights directly resulting to the person asserting them, from the crime of that person”. Accordingly, the contract of insurance will not be construed so as to cover any activities which amounts to a criminal offence – which criminal offences in this case are the threshold for liability under s.16.

For all these reasons it is extremely unlikely that an Insurer would be found legally liable to indemnify an insured in respect of a Shemaiah Grant Order

The origins of s.16 and the Shemaiah Grant Order

While Parliament’s intentions may have been admirable, given the appalling history of road traffic deaths in the Cayman Islands, s.16 appears to have been passed and the Shemaiah Grant Order introduced into law without any due consideration or examination of the position, and how it is proposed to work. It seems to have been influenced by similar laws which had been passed in some states of the United States, without considering whether any such law was necessary in the Cayman Islands. The reason for and scope of such laws in the United States is helpfully set out in an article by Delaina J. Bolich:

“Drunk driving fatalities have influenced legislatures across the United States to introduce laws to prevent DUIs and vehicular homicides One bill, specifically, has been gaining traction in some state legislatures; lawmakers have affectionately named it “Bentley’s Law.” The legislation originated in Missouri after a Missourian grandmother lost her son, his fiancée, and their youngest child to a drunk driver. The grandmother, who is now raising her two surviving grandchildren, felt there needed to be “more long-term and financially tangible” consequences for drunk driving. With the assistance of Missouri legislative representatives, they drafted “Bentley’s Law” to propose that those convicted of vehicular homicide involving the death of a parent would be forced to pay child support for the victim’s minor children until the child reached the age of eighteen. As of April 2022, Tennessee was the first and only state to unanimously pass the bill through both its House and Senate. Prior to being sent to Governor Lee for review, the bill name was amended to “Ethan, Hailey, and Bentley’s Law,” to include the names of the children of a Chattanooga police officer who was killed by a drunk driver. The law mandates a sentencing judge oversee a vehicular homicide conviction and order “restitution in the form of child maintenance to each of the victim’s children.”

In Tennessee the law applies only to drunk driving and the statute makes it clear that any insurance payment must be made first without regard to questions of maintenance and that any maintenance subsequently ordered must be adjusted in accordance with any insurance payment. The statute states:

2e
(1) If the surviving parent or guardian of the child brings a civil action against the defendant prior to the sentencing court ordering child maintenance payments as restitution and the surviving parent or guardian obtains a judgment in the civil suit, then no maintenance shall be ordered under this section.
2) If the court orders the defendant to make child maintenance payments as restitution under this section and the surviving parent or guardian subsequently brings a civil action and obtains a judgment, then the child maintenance order shall be offset by the amount of the judgment awarded in the
civil action.

The Tennessee law presents alternatives to the dependants of victims. If they proceed by way of civil action against the defendant for damages, they forfeit their right to maintenance. If they make an application for maintenance first, they may then seek a civil judgment. The Texas Statute treats maintenance payments as part of the restitution that must be made by a drunken driver to a dependent.

Neither the Texas or the Tennessee statutes deal with the impact of insurance or the effect of such provisions on insurance contracts at all. The likely reason for this is that minimum statutory motor vehicle insurance coverage in the US varies from state to state between $10,000 and (very rarely) $100,000, with minimum statutory coverage typically between $25,000 and $30,000. By contrast in the Cayman Islands, the Insurance Act requires motor vehicle insurance policies to cover covers liability “of not less than one million dollars [i.e. US$1,190,476.19] in respect of the death of, or bodily injury to, any person; and of not less than five million dollars in the aggregate in any one event”.

Accordingly, where the amounts that Insurers in the Cayman Islands are obliged to cover are very substantial (as contrasted with the US) there would seem to be no need to add s.16 obligations to such burden – and this again indicates clearly that such obligations lie outside the scope of motor vehicle insurance.

It is unfortunate that s.16 did not clarify the position, i.e. how s.16 and a Shemaiah Grant Order apply in relation to the alternative civil remedy available to the children of the deceased victim, and the application of any available insurance. Again, the clear inference is that s.16 does not apply to motor vehicle insurance.

General Principles

A motor vehicle insurance policy is a contract like any other. The parties’ obligations depend on the express and implied terms of the contract construed with regard to the surrounding circumstances and the principles of interpretation as laid down by law. The enquiry does not end with a consideration of the parties’ contractual obligations. Social policy considerations affect the treatment of victims of road accidents. For that reason, governments impose legislative requirements upon Insurers which restrict their freedom of contract, and which may prevent insurers from avoiding liability in particular situations,

This policy consideration – which impacts upon the interpretation of the Insurance Act - was addressed in Andrade v Frederick6 a seminal judgment on the application of the Insurance Act in which Hampson and Company appeared for the successful insurer, and in which Ramsay-Hale J. 7 said:

“39. It seems to me that the policy underlying the law was to provide liability coverage for third parties who suffer personal injury and property damage caused by insured vehicles which was palatable to insurers. The scheme of the law, which in addition to providing a
limitation period also required that the insurer be notified of any claim filed with the Court within 30 days, appears to have been intended to give commercial certainty to insurers that claims arising from motor vehicle accidents would be filed within a certain time and that there would be, as Mr Jacob put it, "an end point to their liability". If there were a discretionary period of limitation, as found in sections 13 and 39, insurers would have financial exposure to claims for an indefinite period of time.”

For Insurers to make a profit, premiums must obviously exceed payouts. Premiums are calculated on known, finite and measurable risks. The maintenance obligations under a Shemaiah Grant Order are virtually incalculable. As such possible obligations were unknown when s.16 was considered, let alone when passed into law, such obligations will certainly not have been taken into account by Insurers in the premiums charged and presently payable. This is further indication that s.16 obligations are not covered – or indeed required to be covered – by motor insurers.

Quite apart from the uncovenanted financial burden, it would be extremely difficult if not impossible, for Insurers to deal sensibly with s.16 applications and monitor them throughout the minority of the child or children who benefit. This again indicates that a proper interpretation of the “legal liability” under such policies, does not include satisfying Shemaiah Grant Orders.

In light of the above, exposure to the obligation to meet variable maintenance payments for an “indefinite period of time” would clearly seem to be outside the scope of a contract of insurance unless brought in by clear and express words which deal with the interplay and relationship between s.16 obligations and the existing “legal liability” of Insurers. There are no such express words. The wording of such insurance policies long predated the introduction of s.16. Accordingly, the “legal liability” encompassed by such words in policies, would be limited to the defined, finite and time limited obligations presently covered by policies and not the indefinite – and indeed variable and almost immeasurable – obligations created by s.16 and Shemaiah Grant Orders.

The basis of liability for damages arising out of a motor vehicle accident is tortious i.e. the establishment of fault. A driver who is involved in an accident where there is no liability cannot, under Cayman and English common law as it stands, be subject to any claim for any loss. The essence of motor vehicle insurance is the indemnification of a driver who has been at fault. However, s.16 obligations can be imposed upon a driver whose driving has been faultless. It applies to victims of unlicensed and uninsured drivers, drivers who are disqualified or under the influence of alcohol or drugs8, who might have been driving without any negligence or fault! Even a driver who is disqualified, uninsured, or under the influence of alcohol or drugs might have been driving perfectly safely when, to use an example, a pedestrian darts out in front of his vehicle and is killed. Nevertheless, he will under s.16 come under an obligation to pay maintenance to the deceased’s children. While this is an obvious further shortcoming in the Act, it indicates clearly also that s.16 obligations are not to be considered part of the “legal liability” covered by motor insurance policies.

An insurance settlement or judgment cannot be made by reference to future payments in indeterminate amounts for an indeterminate period of time, whereas maintenance can easily be adjusted by reference to the amount of an insurance payout. Clearly such a fundamental reality would apply in the Cayman Islands and means that insurance payouts would be determined and concluded first without reference to s.16. However, s.16 orders could be made, in accordance with the justice of the case, taking into account any insurance payout.

If there is any potential liability on Insurers to indemnify in respect of s.16 Shemaiah Grant Orders, is there anything in the Insurance Act which prevents an Insurer from excluding such liability under the policy?

The Insurance Act imposes no direct requirements on motor vehicle insurance policies. It makes driving without a motor insurance policy which contains specific obligations, an offence. In this way it mandates certain requirements. Section 4 sets out requirements which must be met, being a liability which may be incurred in respect of the death of, or bodily injury to, any person or persons caused by or arising out of the use of a vehicle on a road and covering liability of not less than $1 million in respect of death or bodily injury.

What is the liability which may be incurred? Although the word “liability” occurs over 50 times in the Insurance Act, there are only two definitions of that liability. The first is in s.4 which deals with death of or bodily injury arising out of the use of a vehicle on a road and the second relates to any liability set out in the policy. This is of limited assistance. However, it is clear that the liability covered by the Insurance Act is liability which results in an action for damages. There are no terms in the Insurance Act which can possibly apply to s.16 or any application made under that section for a Shemaiah Grant Order.

Section 17 of the Insurance Act states:

17. Notwithstanding anything contained in any other law or in any rule of law or equity, no action shall be brought in any court by or on behalf of any person after the end of the period of three years from the date on which a cause of action accrued for any injury or damage against or in respect of which a vehicle is required to be insured under this Law.

Clearly this section is dealing and dealing only with actions for damages which, in the case of death, would be actions under the Torts (Reform) Act. Similarly, s.15 of the Insurance Act requiring insurers to satisfy judgments subject to certain exceptions, can relate only to judgments in actions for damages, and not a Shemaiah Grant Order.

Further the Insurance Act permits insurers to avoid liability where the insurance has been obtained by misrepresentation or non-disclosure. There is no such escape or avoidance clause in s.16. Section 15 of the Insurance Act requires notice of the claim to be given to insurers before or within 30 days of the bringing of the claim - clearly a claim which results in a judgment for damages. This again can have no relevance to applications under s.16.

In the circumstances there appears to be nothing in the Insurance Act which would prevent an Insurer from excluding liability under s.16.

Summary

Despite the broad language of the indemnity clause contained in typical motor vehicle insurance policies as set out above, it is highly unlikely that an Insurer would be found legally liable to indemnify an insured in respect of a Shemaiah Grant Order made against an insured driver.

If a motor vehicle insurance policy were potentially held to indemnify an insured against a Shemaiah Grant Order, there is nothing in the Insurance Act which prevents an Insurer from excluding such liability under the policy.

Although it is highly unlikely that an Insurer would be legally liable to indemnify an insured in respect of a Shemaiah Grant Order, out of an abundance of caution it would be well for Insurers to have a term in their motor vehicle insurance policy making clear that the policy does not cover any application for or award made under s.16 – a Shemaiah Grant Order.