Win for victims of fraud – Appeal decision prevents solicitor’s insurer from aggregating claims

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Claims against an insurer for multiple thefts by a dishonest solicitor cannot be aggregated into a single claim, the Court of Appeal has ruled. The insurer was hoping to restrict its liability to the £2 million single claim limit applicable in this case, via the aggregation provisions contained in the Solicitors Regulation Authority (SRA) Minimum Terms and Conditions of Professional Indemnity Insurance (MTCs).

Mrs Box was a partner in now defunct law firm, Dixon Coles & Gills. Over a number of years she stole £4 million from the firm’s client account. After her thefts were exposed, she was sentenced to seven years imprisonment and the firm was closed down by the SRA.

Dixon Coles & Gills’ clients claimed under the firm’s professional indemnity insurance to recover their losses. The firm’s insurer tried to restrict the pay out to £2 million, arguing that under the terms of the MTCs the thefts were ‘one series of related acts or omissions’. This would enable them to aggregate all the thefts into a single claim under the policy, such that only a single limit of indemnity would apply.

If the insurer was successful in aggregating the claims, the former clients’ only recourse would have been against the firms’ ex-partners to compensate for their significant losses. However, the partners did not have the means to settle the claims personally.

The High Court sided with the claimants and the case went to Appeal to decide whether the claims could be aggregated. The Appeal judges also backed the claimants, ruling that Mrs Box’s thefts were separate acts of dishonesty and not a ‘series of related acts’. This meant that the insurer was unable to aggregate the claims and had to deal with the claims individually.

James Burgoyne, Divisional Director – Claims & Technical, Brunel Professions said; “Decisions on the operation of the aggregation provisions in the MTCs are welcome, and sadly instances of theft of client money by solicitors come up regularly so this decision is practically useful in clarifying how the cover is to operate in such cases. The decision provided additional protection to the clients’ of dishonest solicitors; however, it also has the potential to heap more costs onto insurers – which will not help an already hard market for solicitors’ professional indemnity insurance.”

A report about the Appeal decision has been published by Wynterhill and a report about the original decision by Simmons & Simmons.

Brunel Professions is a leading provider of professional indemnity insurance broking to the legal profession. To find out more call Mark Sommariva on 0203 475 3275.