City law firm wins landmark insurance case
City-based solicitors Royds LLP today celebrated a resounding victory for their clients in a landmark professional indemnity insurance (PII) case heard at London’s Commercial Court.
The judgment in the trial of AIG Europe Ltd v OC320301 LLP & Ors [2015] EWHC 2398 (Comm), is one of the most important of its kind for many years and has attracted considerable interest within the legal profession and insurance industry. It is the first decision on the ability of insurers to aggregate claims made against solicitors’ PII policies.
Solicitors from Royds LLP have been representing the professional trustees in two trusts and over 200 individuals who had invested their money in holiday property schemes in Turkey and Morocco.
In 2009, they had been left out of pocket as a result of the alleged negligence of the now defunct International Law Partnership LLP.
The firm’s run-off insurers, AIG Europe Ltd, had brought the claim against their insured, seeking a declaration that the limit of indemnity for all claims under their policy should be capped at no more than £3million. AIG relied on the wording contained in the Solicitors’ Minimum Terms of Cover (MTC), which were approved by the Law Society in 2005 and are still current. The MTC set the minimum standard of cover that all insurers in the solicitors PII market must provide as a matter of law.
The insurers had made the case that their liability should be limited on the basis that the hundreds of claims brought by the individuals could be aggregated into a single claim.
But sitting in the Commercial Court today (Friday, 14th August), Mr Justice Teare rejected this argument and ruled that the claims could not be aggregated under the MTC wording.
Richard Woodman, a Partner at Royds, welcomed today’s decision.
“Hundreds of ordinary people had lost money after investing in the schemes overseas and this was a very important case as it would have directly affected our clients’ ability to recover their losses.
“If AIG had been successful, then the claims would have been aggregated and the maximum recovery would have been limited to £3million, when in fact over £11million was lost in total. We are obviously delighted therefore, that the argument was rejected by the Judge.
“Today’s result is also welcome news for the legal profession, as AIG’s interpretation of the Minimum Terms of Cover would have set a very dangerous precedent and placed law firms at financial risk if insurance firms had refused to cover multiple claims with high aggregate values.
“We are also pleased that the Law Society and the Solicitors Regulation Authority (SRA) recognised the implications of this case and made submissions to the court during the trial.”
Royds LLP instructed Tom Leech QC of Herbert Smith Freehills (Advocacy Unit) and Edward Risso-Gill of Thomas More Chambers as counsel for the trial.
For further details about this case please contact Richard Woodman (Partner) or David Bowman (Senior Associate).