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INSURANCE: Fully covered

28 September 2012  

David Niven and David O’Brien examine the perils of pursuing indemnity insurers

In high-value professional negligence claims against small firms of solicitors, claimants will often be entirely reliant upon those firms’ professional indemnity (PI) insurers to pay any damages awarded. Problems arise due to the fact that neither the solicitor defendants nor their insurers are required to confirm that the claim will be covered by the policy, nor disclose the terms of indemnity under the policy, until such time as the claim has been proven and the defendant solicitors have gone into insolvent liquidation (The Third Party (Rights Against Insurers) Act 1930 provides claimants with remedies directly against insurers in those circumstances). This creates uncertainty when litigating, as a claimant can incur substantial costs bringing his claim to trial, to find that the solicitor defendants have become insolvent and that the claim is not covered by their PI insurance.

Additional Info

  • Case(s) Referenced:

    Godiva Mortgages Ltd v Travelers Insurance Ltd (Unreported, 13 December 2011)

    Lloyds TSB General Insurance Holdings Ltd & ors v Lloyds Bank Group Insurance Co Ltd [2003] UKHL 48