Supreme Court to Rule on Important Points of Insurance Law of Particular Importance to Solicitors and Clients Claiming Against Them

21st September 2016

The solicitors profession, and it’s insurers, are anxiously awaiting the Judgments of the Supreme Court in two separate cases relating to solicitors’ professional indemnity insurance.

All solicitors’ professional indemnity insurance is effectively made on similar terms as any policy issued must comply with the “Minimum Terms” as provided by the Solicitors Indemnity Insurance Rules.

Both cases involve the insurer, AIG.

In the first of these cases, Impact Funding Solutions v AIG Insurance Limited, the issue before the Court is to decide the scope of the “debts and trading liabilities” exclusion under the policy.

The insured solicitors in this case, Barringtons, conducted volume personal injury claims.

As part of the scheme in which they were involved, Impact Funding agreed to provide Barringtons’ clients with loans to cover the expert reports, court fees and other disbursements in connection with their cases.

Barringtons were negligent in handling a large number of these cases and Impact sought to recover the monies it had lost on failed claims from Barringtons’ insurer, AIG.

AIG refused to indemnify Barringtons arguing that the liability fell within the exception under the policy which excludes claims for “debts and trading liabilities”.

At first instance AIG were successful however, the Court of Appeal unanimously overturned that decision and found that the exception did not apply.

The Appeal was heard at the end of June 2016 and Judgment is now awaited.

The second case, AIG Europe Limited v OC320301 LLP, concerns the issue of aggregation.

We have previously written on this case and the subject and in particular the disappointing Judgment from the Court of Appeal which gave little or no assistance to parties in trying to decide whether or not similar claims were to be aggregated.

Where claims are aggregated there will be one limit of indemnity (typically £2million) which will be applied to the whole of the claim so, in many cases, will not be sufficient to meet the liability.  If however the claims are not aggregated then each claim would be entitled to the separate limit of indemnity i.e. at least £2million each.

Teare. J in the Commercial Court gave a Judgment in which he at least attempted to provide guidance as to when claims could be aggregated.

Unfortunately, the Court of Appeal, having expedited the Appeal, handed down a Judgment which is at best opaque and leaves the questions unanswered.

The Supreme Court have expedited the Appeal in this case and we understand it is due to be heard in October 2016.

Hopefully once their Lordships have handed down Judgments in both these cases there will be much greater certainty for all dealing with these issues.

Howard Colman