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14 October 2009
Denying Cover Insurers arguments fall into 5 principal categories: 1. Avoiding the Policy. 2. Scope of Insuring Clause. 3. Condition Precedent. 4. Policy Exclusions. 5. Aggregates and Deductibles.
Health Warning conflicts of interest Take no steps capable of ratifying policy or waiving right to avoid. Deal with coverage at first opportunity. If point arises during defence of claim, consider for whom you act. If for both Insurer and Insured, you are conflicted out. See TSB Bank Plc v. Robert Irving & Burns [2000] 2 All ER 826.
The 3 Primary Questions 1. Does the Policy respond? 2. If yes, are any of the Policy Exclusions engaged? 3. If no, do any of the Policy Conditions operate to limit or reduce the indemnity?
Question 1
Does the Policy respond? Tension between MDIS Limited v. Swinbank and Others [1999] EWCA Civ 1884 and London Borough of Redbridge v. Municipal Mutual Insurance Limited [2001] 1 Ll LR Ins 546.
(a)
Per Tomlinson J.
In my judgment, it is normally neither permissible nor possible to look beyond or outside the four corners of the determination itself for the basis of the liability to which the Insured has become subject it is simply not a logical possibility that the imposition of liability in fact arose from different facts and matters The fact that the former Chief Executives conduct might be characterised as criminal is beside the point. It was enough for the pensioners purposes that he was allowed to mislead them.
Question 2
If the loss falls within the Insuring Clause, do any of the Policy Exclusions avail Insurers?
Question 3 If Insurers cannot rely on any Policy Exclusions, can they nevertheless take advantage of any Policy Conditions to limit or reduce the indemnity?
Categories of Condition 2 categories: Conditions precedent, breach of which entitles Insurers to decline indemnity. Conditions for breach of which Insurers remedy is limited to damages and/or a reduction in the amount of the indemnity.
Condition Precedent
The assured shall as a condition precedent to their right to be indemnified under this policy give to the insurers immediate written notice of (i) any claim made against the assured; (ii) any loss discovered by the assured.
The Legal Test Calm descends not yet Twinsectra v. Yardley [2002] UKHL 12 Barlow Clowes v. Eurotrust [2005] UKPC 37 Abou- Rahmah v. Abacha [2006] EWCA Civ 1492 Bryant v. Law Society [2007] EWHC 3043 Admin Be prudent
The procedure - 1 Reservation of position Jointly instructed solicitors Beware conflicts abound Insurers desire for economy A dishonesty investigation requires separate representation
The procedure - 2 Do insurers want to chase? Is it worth it? Effect on claim Size of insured? Potential for recovery? SRA notification - when Investigation Interview
The procedure 3 Interview Voluntary Ensure notification letter is unambiguous One chance Report of decision to SRA Value of process Subsequent challenge taking control.
Hints for detection Speed is of the essence Be pro-active - attend the premises Do not expect SRA co-operation Follow the money Ledgers, bank statements File copies where possible Find the water-cooler
Hints for detection - 2 Claims to encourage or not? Start your database early establish patterns
Elephant traps TSB v. Robert Irving & Burns [2000] 2 All ER 826 - beware the actual conflict Judges take a keen interest Zurich v Karim [2006] EWHC 3355 Would you advise a client to attend an interview Lord Ouseleys report
AGGREGATION
Spike Charlwood
INTRODUCTION
What is aggregation?
The purpose of an aggregation clause [is]: to enable two or more separate losses covered by the policy to be treated as a single loss for deductible or other purposes when they are linked by a unifying factor of some kind.
Lloyds TSB, HL, per Lord Hoffmann (at para.14), approving Moore-Bick J at first instance
A preliminary question:
How many claims are there?
Haydon v Lo & Lo [1997] 1 WLR 198
Context
Overall limit of cover Limit of cover per claim / series of claims Excess / deductible
IMPORTANCE
Standard Life [2008] EWHC 222 (Comm) Pensions mis-selling claims averaging <10k ... but leading to a total payment >100m Cover: 75m xs 25m Hence, recovery =
0 if separate claims 75m if claims aggregated
MINIMUM TERMS
Accountants (ICAEW):
B.1. The total liability of the Insurers in any Period of Insurance shall not exceed in the aggregate the sum specified in Item [ ] of the Schedule.
RICS:
A1.3. The maximum indemnity available ... In respect of each CLAIM or any SERIES OF CLAIMS shall (...) not exceed the INDEMNITY LIMIT ... G20. SERIES OF CLAIMS Shall mean a number of CLAIMS (...) that arise directly or indirectly from the same originating cause. (See Lloyds TSB, para.[48])
MINIMUM TERMS
Solicitors (2000-4):
The insurance may provide that all Claims against any one or more Insured arising from the same act or omission or from one series of related acts or omissions will be regarded as one Claim for the purposes of the [sum insured and the excess].
MINIMUM TERMS
Solicitors (2005-8):
The insurance may provide that, when considering what may be regarded as one Claim for the purposes of the [sum insured and the excess]: (a) all Claims against any one or more Insured arising from: (i) one act or omission; (ii) one series of related acts or omissions; (iii) the same act or omission in a series of related matters or transactions; (iv) similar acts or omissions in a series of related matters or transactions and (b) all Claims against one or more Insured arising from one matter or transaction will be regarded as one Claim.
Scenario:
Claim 1 is made and notified in year 1 Claim 2 is made and notified in, apparently, year 2 Claim 2 would aggregate with Claim 1 if they had been made in the same year