The recent first instance decision in Crowden v QBE Insurance (Europe) Ltd [2017] EWHC 2597 (Comm) has applied the approach to exclusion clauses in insurance policies set out in the Supreme Court decision of Impact Funding Solutions v Barrington Support Services [2016] UKSC 57; [2017] AC 73.

The Claimants brought a claim against QBE pursuant to the Third Parties (Rights against Insurers) Act 1930 in respect of negligent investment advice provided by one of its insureds in relation to two financial instruments, which had become insolvent. QBE was successful in its application for summary judgment on the basis that the following insolvency exclusion applied:

“This Insured section excludes and does not cover any claims, liability, loss, costs or expenses:…arising out of or relating directly or indirectly to the insolvency or bankruptcy of the Insured or any insurance company, building society, bank, investment manager, stockbroker, investment intermediary, or any other business, firm or company with whom the Insured has arranged directly or indirectly any insurance, investments or deposits…”

The Claimants sought a narrow interpretation, arguing that the insolvency exclusion was ambiguous and did not exclude liability for negligent advice, since it did not expressly say so, and applied the principles of Canada Steamship Lines Ltd v The King [1952] AC 192, 208.

The Judge, Peter MacDonald Eggers QC, disagreed and held that the position in respect of insurance contracts is “wholly distinguishable” since an exclusion clause in an insurance policy is designed to define the scope of indemnity and not to exclude, restrict or limit a primary liability on the part of an insurer (as an exemption clause would typically do).

Applying the principles in Impact Funding, the Judge concluded that: “the court must adopt an approach to the interpretation of insurance exclusions which is sensitive to their purpose and place in the insurance contract.” On this basis, the exclusion clause applied on its plain reading and the insolvency did not need to be the proximate cause, albeit that it had to “stand out as a contributing factor” to the claim.

The judgment can be found here.