March 2, 2016

Landmark PII case set for the Court of Appeal

A landmark professional indemnity insurance (PII) case is set to go to the Court of Appeal later this month.

City solicitors Royds represent 214 individuals who had invested their money in holiday home schemes in Turkey and Morocco. The action involves their former trustees, a defunct firm of solicitors and their professional indemnity insurer AIG Europe Ltd (AIG). The combined claims are worth in excess of £11million.

In August last year, Royds LLP’s Dispute Resolution Team won a well-publicised victory against AIG. The insurer had unsuccessfully argued that its limit of liability under the run off policy with the defunct firm was a maximum of £3million. They cited the effect of the aggregation clause in the Minimum Terms of Cover (MTC) which all law firms are obliged to take as PII in accordance with rules set by the Solicitors Regulation Authority.

In the first judgment on the MTC, Mr Justice Teare sitting in the Commercial Court found that its wording did not permit the aggregation of claims brought by many individuals into a single claim for the purpose of the AIG policy, as those individuals’ claims were not inter-connected or dependent on each other.

However, AIG received permission to appeal against the judgment, citing its significance to the market for solicitors’ PII policies.

In late 2015, with the agreement of the parties, Lord Justice Longmore ordered the expedition of the appeal so that it could receive urgent consideration by the Court of Appeal. The appeal hearing is due to start on either the 21st or 22nd March 2016 with a time estimate of two days.

The decision is of importance because, should the original ruling be overturned, law firms and their clients will face severe financial risk as insurers may be permitted to refuse to cover multiple claims that have high aggregate values but which are not necessarily connected or dependent on each other.

It is expected the Court of Appeal will reserve its judgment following the March hearing, with the decision due a few weeks later.

For more information about this case please contact Richard Woodman or David Bowman of Royds LLP.


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