In ARC Capital Partners Ltd v Brit Syndicates Ltd and QBE Underwriting Ltd EWHC 141 (Comm) Mr Justice Cooke held that an exclusion clause in a professional indemnity insurance policy which excluded coverage for claims “in any way involving” acts committed prior to a certain cut-off date would not apply in circumstances where the acts in question were merely part of the factual and historical background to the claim. Rather, there had to be some causal connection between the acts and the claim for the exclusion to apply.
The underlying claim in this case related to an allegedly negligent investment made by the claimant in the present action, ARC Capital Partners (the Claimant), on behalf of ARC Capital Holdings. As a result of that advice, ARC Capital Holdings ultimately brought a claim against the Claimant, which alleged various wrongful acts occurring in 2010 and, in the alternative, wrongful acts occurring in 2008. ARC Capital Holdings sent the Claimant a letter concerning the claim in April 2013 and a further letter in January 2014 (the latter enclosing draft particulars of claim). The Claimant notified its insurers, including Brit Syndicates Ltd and QBE Underwriting (the Defendants), in January 2014, having received the second letter, under a policy covering the period 23 October 2013 to 23 October 2014. The Defendants and Claimants had entered into consecutive policies on similar terms since June 2009.
In broad terms, the principal issues in the case related to:
- The effect of a Retroactive Date Clause, which provided that claims under the policy would be excluded if they “in any way” involved any act committed prior to 5 June 2009; and
- Whether the claim in question had been notified “as soon as reasonably practicable” in the circumstances.
Cooke J held that the Retroactive Date Clause did not apply and that the claim had been properly notified. In particular he made the following findings:
- The Retroactive Date Clause could not apply simply because certain background events to the claim in question occurred prior to June 2009; there had to be some causal connection between the claims and the historical events. The primary case of ARC Capital Holdings in the underlying claim related to acts in 2010; any reference to prior agreements made in 2008 were by way of background only. Cooke J also held that the alternative case was just that; although it did allege wrongful acts occurring in 2008 it was not “the case being actively pursued”.
- The letter of April 2013 was not a “Claim” for the purposes of the policy and therefore did not need to be notified. The Claimant had therefore adhered to the notification clause by providing notice in relation to the second letter in January 2014.