In Liberty Managing Agency Limited and others v Marwan Chedid and George Salibi [2026] EWHC 2354 (Comm), the Commercial Court (Jacobs J) held that the claimant insurers remained obliged to advance the defendants’ defence costs of contesting criminal proceedings under a directors’ and officers’ liability policy. The Court held that: (1) pending either a final decision of a court, tribunal or regulator or a formal written admission, the policy did not permit avoidance for alleged fraudulent misrepresentation or non-disclosure; and (2) the costs of defending the unproven criminal allegations were not uninsurable as a matter of public policy.
Background
The defendants, Mr Marwan Chedid and Mr George Salibi, were formerly officers of Petrofac Ltd and insureds under Petrofac’s D&O insurance programme. They face criminal charges relating to alleged bribery offences, to which they have pleaded not guilty.
The defendants’ defence costs had been met under a primary and first excess policy, whose limits were close to exhaustion. The insurers provided a second excess layer with a limit of £45 million in excess of £30 million.
In August 2026, the insurers purported to give notice of avoidance of the second excess policy in respect of the defendants on the grounds of alleged fraudulent misrepresentation and fraudulent non-disclosure. Those allegations are disputed and have not been determined.
Given the proximity of the criminal trial and the need for an early determination of whether the defendants’ defence costs should continue to be advanced, the preliminary issues were tried on an expedited basis.
Issues
Clause 8.2 of the policy provided that:
“The Insurer shall not avoid this policy or any severable part of the policy or exercise any other legal remedy on the grounds of misrepresentation or non-disclosure, except with respect to:
- an Insured who has fraudulently misrepresented or fraudulently non-disclosed material information prior to the conclusion of this contract; …
where such fraudulent conduct is established by a final decision of a court, tribunal or regulator or by a formal written admission of the Insured …”
The principal issues determined by the Court at the trial of preliminary issues were:
- whether, on a proper construction of clause 8.2 and/or as a matter of public policy, the insurers were entitled to avoid the defendants’ interests in the policy before the alleged fraudulent conduct had been established in one of the ways specified in clause 8.2; and
- whether the costs of defending the bribery allegations were uninsurable as a matter of public policy.
Decision
Mr Justice Jacobs held that, as a matter of construction, clause 8.2 precluded avoidance unless and until the alleged fraudulent conduct had been established in one of the ways specified in the clause. He considered that its concluding words were not surplusage: they imposed a further requirement which had to be satisfied before the insurers could exercise a right of avoidance.
The Judge held that the clause therefore modified the ordinary position under which avoidance is a “self-help” remedy that may be exercised before its validity has been determined. On the judge’s construction, it required the policy to remain in force pending a final decision or a formal written admission. He found that construction consistent with other provisions of the policy, including the conduct exclusion, and with the commercial purpose of D&O cover.
The insurers’ public policy argument was that, as a matter of law and irrespective of its interpretation, clause 8.2 could not have the effect for which the defendants contended, as parties cannot agree provisions which exclude the consequences of their own fraudulent wrongdoing. Jacobs J held, however, that public policy does not prevent parties from agreeing how their contract is to operate while an allegation of fraud remains unproven. The Judge held that clause 8.2 did not alter the consequences if fraud were ultimately proved: in that case, the policy would be avoided from inception and benefits received by the defendants, including advanced defence costs, would have to be returned. He considered that the clause regulated the “gap” between present uncertainty and ultimate resolution.
Jacobs J noted that there was no English authority which decided that public policy prevents the parties from reaching agreement as to how their contract is to operate at a time when there is an unproven allegation of fraud. He acknowledged that Onley v Catlin Syndicates Ltd [2018] FCAFC 119, an Australian decision of a three-judge court in the Federal Court, provided support for the insurers’ argument that a clause such as clause 8.2 would be ineffective as a matter of public policy. However, he held that Onley contained no clause equivalent to clause 8.2 and that the views expressed by the judges were obiter. To the extent that the judges expressed a view that a clause such as clause 8.2 would be ineffective as a matter of public policy, Jacobs J disagreed and did not accept that this was the position in English law.
In relation to the second preliminary issue, applying Coulson v News Group Newspapers Ltd [2012] EWCA Civ 1547, Jacobs J held that public policy did not prohibit an agreement to fund defence costs incurred in contesting unproven criminal allegations, including allegations of bribery.
Accordingly, the insurers remained obliged to advance the defendants’ defence costs in accordance with the policy.
Significance
The judgment considers the operation of non-avoidance and final-adjudication provisions commonly found in D&O policies. It indicates that clear wording may preclude immediate avoidance and require an insurer to continue funding defence costs while allegations of fraud remain unresolved, thereby displacing the usual “self-help” nature of the remedy.
The decision also distinguishes between indemnifying the consequences of criminal wrongdoing and funding the defence of allegations which have not been proved.
The Court has granted the insurers permission to appeal to the Court of Appeal.
Peter MacDonald Eggers KC, Charles Holroyd and Sophie Hepburn acted for the insurers, instructed by Reynolds Porter Chamberlain LLP.
Rebecca Sabben-Clare KC and Daniel Corteville acted for the second defendant, instructed by Ashurst Perkins Coie.
