Supreme Court to hear landmark AIG insurance case
AIG Europe Ltd v OC320301 LLP (UKSC 2016/0100)
Monday 10 October 2016 - Court 2, Supreme Court of Justice
A landmark professional indemnity insurance appeal brought by AIG Europe Ltd against private investors will be heard in the Supreme Court on Monday, 10 October 2016, with potentially far-reaching implications for the solicitors’ profession, the insurance industry, and the general public.
The most senior judges in the country will determine whether claims brought by 214 property buyers and investors under the insurance policy held by defunct law firm, The International Law Partnership (TILP), should be treated as one claim, several smaller claims or individual claims.
The hotly-anticipated judgment in this case is likely to be the most important since the House of Lord’s decision in Lloyds TSB General Insurance Holdings and others v. Lloyds Bank Group Insurance Company Limited  UKHL 48. It will be the first time the Supreme Court has been asked to interpret the wording of the aggregation clause in the Minimum Terms of Cover (MTC) for professional indemnity insurance policies which are mandatory for all regulated law firms according to rules set by the Solicitors Regulation Authority.
Richard Woodman, a partner at Royds Withy King, who has been representing the 214 investors since 2010, said: “We act for a large number of very disappointed people who placed their trust in the specialist law firm at the centre of this case, lost their investment due to its catastrophic failings and have spent nearly a decade trying to come to terms with a gaping hole in their finances and the anxiety of not knowing whether they will ever be properly compensated. To make matters worse, they have now become the victims of a concerted attempt by the insurance industry to give insurers carte blanche to decide for themselves whether to treat claims individually or as part of an aggregated group (and therefore subject to one indemnity limit).”
David Bowman, a senior associate leading the Royds Withy King litigation team, continued: “Solicitors are obliged to have professional indemnity insurance to protect their clients, giving them confidence and peace of mind. For the public this is an important reason to instruct solicitors and in this case, that factor was material to why our clients had the confidence to invest in these schemes. Our clients are angry and disappointed that the participating insurer has fought this case for so long and at such cost in an effort to deny them compensation for their losses, which exceed £11 million. The decision by the Supreme Court could well determine this long-running dispute and is likely to have significant and long-lasting implications for many other cases currently going through the courts.”
Royds Withy King represents the 214 investors, mostly ordinary people who wanted to buy holiday homes in two developments in Turkey and Morocco from a company called Midas International Property Developments Plc in 2006 and 2008. That company controlled two local companies which were to carry out the developments. The investors paid money for the holiday homes into two separate trusts held by The International Law Partnership who were charged with releasing money on being satisfied as to the level of security over the land to be developed. But the professional trustees released the investors’ money without adequate security and when the property schemes failed their money was not reimbursed. Both Midas International Property Developments and The International Law Partnership subsequently went insolvent.
Royds Withy King was instructed to restore and bring separate claims against The International Law Partnership for breach of contract, professional negligence and breach of fiduciary duties on behalf of investors in each development. The International Law Partnership’s insurers, AIG Europe Ltd, contested the level of its liability on the basis that all claims could be aggregated to one claim with a maximum pay-out of £3m. The claims total over £11m plus interest so this would mean a substantial shortfall to individual investors.
The case was initially heard in the Commercial Court in July 2015 when AIG lost before Mr Justice Teare having argued that the claims should be treated as one claim and that its limit of liability under the run-off policy was a maximum of £3m.
The Commercial Court found that the wording did not permit the aggregation of claims brought by many individuals into a single claim for the purpose of the AIG policy, as those individuals’ claims were not inter-connected or dependent on each other.
AIG then appealed that decision in the Court of Appeal in March 2016. However it effectively lost there when the Court of Appeal found that relatedness did not necessarily mean inter-connection but did require a unifying factor which was intrinsic to the matters or transactions that gave rise to the claims.
AIG has now appealed the decision of the Court of Appeal to the Supreme Court, which will finally determine this insurance claim and the proper interpretation of the aggregation clause in the Minimum Terms of Cover.
The case will be streamed live on the Supreme Court website from 11am onwards on Monday 10 October 2016.