In the recent case of Professional Financial Services v Dick t/a The Heathfield Partnership, a firm of financial advisors (the "Firm") sought damages for alleged breach of contract from one of their authorised representatives acting as an independent financial advisor. The financial advisor had allegedly negligently advised a married couple to invest a sum of money in an investment vehicle. When the couple lost out financially, they made a complaint to the Financial Ombudsman Service. The complaint was upheld and the Firm made financial redress to the client.

The Firm had professional indemnity ("PI") insurance in place, however, the sum owed to the couple was within the excess on the policy. A direct financial loss was incurred by the Firm, and so it sought to recover the loss by seeking damages directly from the financial advisor.

The matter was determined in the Court of Session following a legal debate.


It was submitted on behalf of the financial advisor that it was an implied term of the contract between the advisor and the Firm that the Firm would effect and maintain PI insurance cover against a risk of liability to clients arising from the advisor's negligent acts or omissions in the course of her appointment as a representative of the Firm, and that such insurance would comply with the applicable rules of the Personal Investment Authority ("PIA").

It was also contended on behalf of the advisor that it was an implied term of the contract that should the Firm suffer a loss as a result of the insured risk, the Firm were entitled to seek to recover that loss from the insurance with no further claim against the advisor. The financial advisor sought to rely on a legal principle that the intention of the parties, sensibly construed, must have been that the loss was to be recouped from insurance monies and that there was to be no further claim against the negligent party. As a legal point, it was argued on behalf of the financial advisor that, as the written pleadings contained admissions in relation to the existence of the contract and the PIA rules, all necessary facts were before the court to allow it to determine this issue, without proceeding to a full trial.

On behalf of the Firm, it was submitted that the implied term was not admitted and, accordingly, it was too early for the court to determine this issue.


Lord Brailsford decided that the terms of the contract between the parties and the regulatory regime had been admitted in the written pleadings and that he was entitled to take account of these. As a result, he was satisfied that the implied terms advanced on behalf of the advisor did exist and that it was a matter of agreement between the parties that the Firm would effect and maintain PI insurance against the risk of liability to clients arising from the negligent acts or omissions of the advisor while acting as the Firm's appointed representative. Accordingly, the Judge dismissed the action, resulting in the Firm being unable to recover its loss from the financial advisor.

If you would like to read the full judgment, please click here.


This decision is a timely reminder that even if you have insurance in place, a claim may fall solely within the excess and you may not be able to recover this loss from the party at fault. Check and review the excess under your PI policies. MacRoberts has extensive experience in dealing with a wide range of commercial disputes, including numerous PI insurance matters.