7KBW teams act in major preliminary issues trial

Peter MacDonald Eggers QC
James Brocklebank QC
Marcus Mander
Henry Moore

[2018] EWHC 1083 (Comm)

James Brocklebank QC acted with Henry Moore, and Peter MacDonald Eggers QC acted with Marcus Mander in this substantial trial of 10 preliminary issues, raising a number of interesting points of law in the insurance context and more generally, particularly relating to the notification of insurance claims and the operation of the Third Parties (Rights Against Insurers) Act 1930 (“the 1930 Act”).

James Brocklebank QC and Henry Moore acted for the First Claimant, the American School of Dubai.

Peter MacDonald Eggers QC and Marcus Mander acted for the Third to Sixth Defendants (the Excess Insurers).

The dispute concerned two professional indemnity insurance claims brought pursuant to the 1930 Act in respect of two arbitral awards made against an insolvent firm of architects.

The key issue was the policy period to which each Claimant’s claim attached: there were two relevant policies, one for the 2008-2009 year, and another for the 2009-2010 year. The primary insurer was the same for both policy years and the insured had made notifications to both policies.  If both claims fell into the same policy year, the primary cover would (subject to defences) be exhausted and the bulk of one of the claims would fall to the excess policies.  If the claims fell into different years, the primary insurer would have to pay both claims.  The Claimants and the Excess Insurers had a common interest in contending that the third parties’ claims fell into different policy years, in contrast to the primary insurer (whose interest was to pay only a single policy limit).   

In the result, James Brocklebank QC and Henry Moore, and Peter MacDonald Eggers QC and Marcus Mander, successfully argued that the primary insurer was wrong to treat the claim as arising only under the earlier policy. The Judge accepted the First Claimant’s contentions that valid notifications had been made to both policies, and that significant elements of the claim properly fell under the later policy.

The Judge also found in favour of the First Claimant, accepting submissions made by James Brocklebank QC and Henry Moore, on further issues relating to the applicable policy period, including arguments of estoppel and late notification. The Judge rejected the primary insurer’s submission that a notification was late because the insured had chosen to run the risk that it might have designed a structurally inadequate building.

The Judge, thanking counsel for their “very clear and well thought out written and oral submissions”, decided several important points of law, including the following:

First, the Judge agreed with James Brocklebank QC and Henry Moore that, when an insured has made valid notifications in respect of the same claims (or circumstances giving rise to the same claims) to two consecutive claims-made policies, the insured may choose the policy under which it brings a claim (provided that the later policy does not contain an express exclusion for claims deemed first made under the earlier policy: here, the primary insurer’s policies did not). This decision will be of some interest to those drafting policy wordings.

Secondly, the Judge held that the primary insurer had a claim against the insolvent insured for overpaid defence costs because of a term implied into the policy or (obiter) the law of unjust enrichment, adopting the reasoning in Cox v Bankside Members Agency [1995] 2 Lloyd’s Rep 437 (Phillips J).  The primary insurer, and Peter MacDonald Eggers QC and Marcus Mander for the Excess Insurers, successfully argued that, in those circumstances, the 1930 Act permitted the primary insurer to raise an equitable set off against a third-party claimant in respect of such overpaid costs. In disagreement with the reasoning in Murray v Legal and General Assurance Society [1970] 2 QB 495, the Judge considered that the question was one of the substantive law of set off, and was unaffected by the 1930 Act.

Thirdly, the Judge accepted Peter MacDonald Eggers QC’s and Marcus Mander’s argument that the Claimants could not rely on the 1930 Act to recover the sums set off from the Excess Insurers under the Excess Policies.  He agreed that defence costs cover is first party pecuniary loss insurance and not third party liability insurance, a point which was not addressed in the well-known Court of Appeal decision on this topic In Re OT Computers Ltd [2004] Lloyd’s Rep. IR 669.  Accordingly, no rights passed to the Claimants under the 1930 Act.  It will be interesting to see whether the position is the same under ss. 1 and 16 of the Third Parties (Rights Against Insurers) Act 2010.     

Fourthly, the Judge made two significant rulings as to the recoverability of interest, agreeing with Peter MacDonald Eggers QC and Marcus Mander that (a) post-award interest awarded by the tribunal was not recoverable under the insuring clauses of the policies, and (b) the First Claimant could not be awarded interest under the Senior Courts Act 1981 on costs which had been awarded without interest by the tribunal.

To view the judgment please click here.

Date added: May 9th, 2018


Area of Expertise

Commercial Litigation
Insurance & Reinsurance