The Law Society of England and Wales and the Solicitors Regulation Authority (SRA) have been granted leave by the High Court to intervene in the case of Godiva Mortgage Limited v Travelers Insurance in which Travelers is arguing that it is entitled to cap cover by aggregating claims made against its insured, Willmett Solicitors, a Berkshire firm now in liquidation.
The claims against Willmett arose from the fraudulent activities of one of its conveyancing partners. Godiva is presumably bringing its claim against Travelers under the Third Parties (Rights against Insurers) Act 2010, which allows the mortgage company to bring a claim directly against the insurer instead of joining with other unsecured creditors.
Travelers is asserting that the activities of one partner can be aggregated as "one claim" and that it is entitled to cap cover by refusing to pay sums exceeding £2 million, being the per claim limit of its liability under the policy. The total limits appear to be in excess of that sum and the total losses in this case could be in excess of £50 million.
The SRA is intervening on behalf of the Compensation Fund (the Fund), a discretionary fund for any person affected by a solicitor's dishonesty or failure to account. It is a fund of last resort: a client applies to the Fund for a recompense grant when insurers do not cover its losses. The SRA is of the view that it is under a duty to ensure that the Fund is only used for "appropriate applications" for grants due to its limited funds and therefore it must rigorously analyse and challenge decisions by insurers that refuse coverage in whole or in part.
The Law Society is intervening, something which it says is "vital", because Travelers' interpretation of the aggregation clause, that the insurance indemnity is capped at £2 million, rather than a higher sum, could significantly affect a claimant's right of redress. If upheld, the Law Society believes that this could raise major concerns for the profession and would be against the public interest. Furthermore, it considers that the profession needs to have confidence in its PII coverage and know exactly against what it, and its clients are protected.