The Court determined a number of issues about the nature and effect of a policy of professional liability insurance. The policy was issued by London underwriters in favour of Rathbone Brothers plc (“Rathbones”), their subsidiaries and “insured persons”, who were defined by the policy to include employees of an insured company employed in the performance of “professional services”. Professional services were defined to mean the declared financial services “performed by or on behalf of an insured company pursuant to an agreement with a third party … for compensation”.

The policy also included a provision that “Insurance provided by this policy applies excess over insurance and indemnification available from any other source” (the Excess clause) and that “The insurer shall be subrogated to all insureds’ rights of recovery, contribution and indemnity before or after any payment under this policy” (the Subrogation clause).

The issues arose against the background of claims being brought in Jersey by the beneficiaries of the Jack Walker 1987 Settlement (the Trust) against a personal trustee for breach of trust. The trustee has denied the claims.

Rathbones had agreed, by contract, to indemnify the trustee against liabilities incurred by reason of his acting as a personal trustee at Rathbones’ behest (the Rathbone Indemnity).

There were three principal issues which the Court decided relating to the policy:
(1)       In acting as a personal trustee, was the trustee an insured person?
(2)       Did the policy apply excess over the Rathbone Indemnity pursuant to the Excess clause?
(3)       Were the insurers entitled to exercise rights of subrogation in respect of the Rathbone Indemnity?

The Court held that:
(1)       The trustee was an insured person in his capacity as a personal trustee because he acted “on behalf of” the insured company in that he acted as a trustee at the behest of a subsidiary of Rathbones. For this purpose, the policy did not require an agreement for the provision of the trustees’ services between the insured company and the trust.
(2)       The policy did not apply excess over the Rathbone Indemnity pursuant to the Excess clause. Even though the clause applied to non-insurance indemnities, the judge held that it did not apply to indemnities provided by co-insureds.
(3)       The insurers were entitled to exercise rights of subrogation against Rathbones in respect of the Rathbone Indemnity, but only after (not before) payment of the insurance claim. Even though Rathbones was a co-insured, the insurers were entitled to be subrogated, because Rathbones’ liability under the Rathbone Indemnity was not covered under the policy and there was no relevant exclusion of subrogation.

To view the judgment click here.

Leading Counsel for the Claimants: Dominic Kendrick QC, 7 King’s Bench Walk.

Leading Counsel for the Defendants: Peter MacDonald Eggers QC, 7 King’s Bench Walk.