Axis Speciality Europe SE v Discovery Land Company LLC & Ors
[2024] EWCA Civ 7
Royal and Sun Alliance Insurance Limited & Ors v Tughans
31 August 2023
[2023] EWCA Civ 999
Court of Appeal
Insurers argued their policy shouldn't pay because a solicitor firm got a fee through trickery, even though the firm did the work. The court said the firm still lost money by having to give the fee back, and the insurance policy covered that loss.
Key Facts
- •Royal & Sun Alliance Insurance Ltd and other insurers (Appellants) appealed a decision that their professional indemnity insurance policy covered a solicitor firm's (Tughans) liability for a fee received, despite allegations of fraud in obtaining the fee.
- •Tughans, a Northern Ireland firm, was engaged by Brown Rudnick LLP (BR) for services related to a property deal (Project Eagle).
- •Tughans' managing partner, Mr. Coulter, allegedly misrepresented facts to secure a significant fee, part of which he diverted.
- •BR sued Tughans, seeking damages including the return of the fee.
- •The Insurers argued that the policy shouldn't cover the fee as Tughans wasn't entitled to it due to the misrepresentation; therefore, there was no 'loss' to indemnify.
- •The arbitrator ruled in favor of Tughans, finding the fee was earned for work done; therefore, losing it due to a claim constituted a loss.
Legal Principles
Indemnity principle in insurance: Insurance is intended to indemnify an assured for their actual loss, but no more than that.
Godin v London Assurance Co (1758) 1 Burr 489; Castellain v Preston (1883) 11 QBD 380
Construction of insurance policy wording: The insuring clause is interpreted according to its explicit terms and general usage in relation to professional indemnity insurance for solicitors.
Swain v The Law Society [1983] AC 598
Composite policy of insurance: A composite policy comprises a bundle of separate contracts between the insurer and individual assureds. The fraud of one assured doesn't affect others' right to recover.
Arab Bank Plc v Zurich Insurance Co [1999] 1 Lloyd’s Rep 262
Section 69 of the Arbitration Act 1996: Allows appeals on points of law from arbitration awards.
Arbitration Act 1996, s.69
Outcomes
Appeal dismissed.
The court held that even if Tughans obtained the fee through misrepresentation, they still suffered a loss by having to return it. The fee was earned for services provided, and losing it constituted a loss covered by the policy. The court rejected the Insurers' arguments that only a 'substantive' loss is covered by the policy, deeming their interpretation contrary to the public interest goals and the wording of the policy.