Society intervenes in landmark PII case
The Law Society and Solicitors Regulation Authority have been granted leave to intervene in a case that could have a major impact on professional indemnity insurance for law firms.
The High Court granted a joint application from both bodies in the case of Godiva Mortgage Ltd v Travelers Insurance.
The Society took action after the insurer attempted to cap its cover by aggregating claims against a Berkshire firm, Willmett Solicitors, which has since closed.
In a statement, the Law Society said: ‘The case arose out of the activities of a conveyancing partner at a reputable and well-established Berkshire firm.
‘When losses came to light as a result of the financial crisis, numerous claims were brought against Willmett Solicitors and its partners by various lenders, including the claimant Godiva Mortgage Ltd.’
Travelers Insurance asserted that the activities of one partner could be aggregated as ‘one claim’ and refused to pay sums beyond £2m.
As a consequence, some partners at Willmett have already been made bankrupt and the remainder face bankruptcy.
The firm closed in 2009 and has no funds to meet any claims.
The Law Society intervened on the basis of major concerns for the profession and the public interest.
It was joined in the action by the SRA, which raised concerns about the potential impact of the case on the Compensation Fund, the discretionary fund of last resort for anyone affected by a solicitor’s dishonesty or failure to account. Estimates for the Willmett case losses are in excess of £50m.
Law Society chief executive Desmond Hudson said: ‘It was vital that we, as well as the SRA, were able to intervene in this case. The insurer’s interpretation of the aggregation clause, which led them to cap their insurance indemnity, could have widespread significance for the public as it will affect many claimants’ right of redress.
‘It is also of great concern to the profession in terms of their PII coverage and hence to the society to ascertain how aggregation applies in a case such as this.
‘Our members need to have confidence in their PII cover, and this could cast doubt on what they and their clients are protected against.’
Comments
A CASE FOR SEPARATE REPRESENTATION
Why dont the law society and SRA simply insist upon separate representation for lenders and buyers. Our exposure to litigation from lenders will be reduced (provided of course we do not have to certify the titles). Premiums should fall and the problem with lenders panel membership will disappear.
Can someone at the SRA and LS perhaps now give this proper consideration. In my view this is a no brainer!!!!
Come on LS and SRA lets actually do something here. The action you intend to take is presumably going to increase insurance premiums. If our premium goes up anymore our firm would not be able to survive.
Why cant someone actually take some bold steps and actuially do something to save our proffession.
SEPARATE REPRESENTATION IS THE WAY WE MUST NOW GO!!!
CAN THE SRA AND LS RESPOND PLEASE
Presumably the insurer was
Presumably the insurer was "an approved insurer" i.e. approved by the SRA.
It would therefore seem that the SRA was not fully aware of the terms of the policy it was happy to approve. This must surely be negligence on the part of the SRA,-it has approved a policy which neither protects the profession or the public.
Indeed this may well be a major breach of the statutory obligations of the Law Society, and it is the members who will have to pay the bill for this. Another major triumph for the SRA.
Minimum terms
Aggregate indemnity limits are not permitted in primary layer policies issued to solicitors, but clause 2.5 of the Minimum Terms allows a primary layer policy to include an aggregation clause. Presumably, the Travelers policy includes such a clause. If so, the answer to Willmetts' problem depends upon the correct construction of clause 2.5(a) of the Minimum Terms, which allows claims to be aggregated in certain specified circumstances. It is difficult to see how clause 2.5(a) can be said to apply in this case, since the relevant acts or omissions do not appear to have been "related" and the transactions in which they occurred also seem not to have been "related". The fact that it is one person who is carrying out the thefts which give rise to the claims does not of itself bring the matter within clause 2.5(a). The answer might well be different if the Minimum Terms allowed the aggregation of claims arising from one originating cause (Axa Re v Field [1996] 1 WLR 1026), but they do not permit such a wording.
One imagines that, as
One imagines that, as proceedings have obviously been issued, there is at least one counsels opinion which is contrary to your view.
Not necessarily
That wasn't much of a contribution to the debate, was it? Do you want to analyse the minimum terms and the authorities (Axa, Lloyds TSB, etc) and have a go at answering the question, or just snipe at those who have the guts to do so? Travelers wish to try to minimise their exposure. The fact that they are trying to do that does not mean that they have been advised that their argument will succeed.
No analysis was invited. Anon
No analysis was invited. Anon 13.57 was final in his conclusion.
The point being made was surely that others may not be quite so positive as to the meaning of the provision. That hardly constitutes sniping. In litigation both sides usually believe they have a case.