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Clare Dixon KC acts for successful insurer in dismissal of funder’s claim on solicitor’s professional indemnity insurance

News & Judgments
7 February 2022

Clare Dixon KC was instructed by Simmons & Simmons LLP to represent insurers in a claim brought by Doorway Capital Limited (“DCL”) against the professional indemnity insurers of Seth Lovis & Co Solicitors Limited (“SL”). Pursuant to the terms of a Receivables Funding Agreement (“the RFA”) DCL purchased from SL “Receivables” (comprising debts owing to SL from third parties) and, in return, made funds available to SL with the amount of such funds being determined, in part, by the amount of the Receivables notified to DCL. Money received by SL into its client account from third parties in payment for the Receivables was held by SL on trust for DCL. It was accepted that SL owed trust or associated fiduciary duties to transfer such monies to DCL. DCL alleged that SL had failed to transfer about £1.7million to it and, because SL had gone into liquidation, made a claim pursuant to the Third Parties (Rights Against Insurers) Act 2010 on SL’s professional indemnity insurance.

Assuming SL’s liability to DCL for the purposes of the application, SL’s insurer sought and obtained summary judgment on two grounds.

  • First, that SL’s liability  did not fall within the insuring clause of the policy. The Judge found, amongst other things, that whilst the policy did refer to providing an indemnity where the insured was acting as a trustee, to fall within the scope of cover SL must have been providing such services in the course of private practice to DCL, which it was not.
  • Second, the Judge found that if (contrary to his finding) SL’s liability did fall within the scope of cover it would be excluded by the “Debts and Trading Liabilities” exclusion which provided that the insurer would have no liability to indemnify SL in relation to any “legal liability assumed or accepted by an Insured under any contract or agreement for the supply to, or use by, the Insured of goods or services in the course of the Insured Firm’s Practice”.

 The judgment can be found here.

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Clare Dixon KC

Call: 2002 Silk: 2021

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