New Judgment: Impact Funding Solutions Ltd v AIG Europe Insurance Ltd  UKSC 57
26 Wednesday Oct 2016
On appeal from:  EWCA Civ 31
The appellant, AIG Europe Insurance Ltd, sought to establish that Barrington’s (a solicitors) liability to Impact Funding Solutions Ltd for un-repaid loans was caught by the “debts and trading liabilities” exclusion contained in the Minimum Terms and Conditions of Professional Indemnity Insurance for Solicitors and Registered European Lawyers in England and Wales. It therefore sought to establish that it was not liable to cover Barrington’s liability to Impact under its professional indemnity insurance agreement as per the Third Parties (Rights Against Insurers) Act 1930.
On 13 December 2013, the High Court held that Impact’s claim against AIG for an indemnity failed. In a judgment dated 3 February 2015 the Court of Appeal allowed Impact’s appeal.
AIG’s appeal to the Supreme Court was allowed by a majority of 4 to 1. The Court considered that the general doctrine of narrow construction of exemption clauses does not apply in the instant policy, and therefore it was necessary to consider the construction of all relevant terms.
The Court found that the respondent provided a service to Barrington in the loans made to Barrington’s clients as Barrington contracted as a principal with the respondent, not an agent for its clients, and it obtained a benefit which was neither incidental nor collateral from the funding of its disbursements. Barrington paid an administration fee for this and undertook to repay the respondent should a client breach the credit agreement.
Thus there was no basis for implying additional words into the exclusion to limit its scope. This is because the breach of duty relied upon by the respondent is that by Barrington to its clients. However the respondent’s claim against the appellant is not derived from the clients’ claims, and is rather an independent cause of action. Excluding the claim maintains the coherence of the policy, and is consistent with the purpose of the policy which is to protect the clients of solicitors.