Kerry Underwood

CONTRA PROFERENTEM AND INSOLVENCY EXCLUSION IN PROFESSIONAL INDEMNITY INSURANCE POLICY

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In Crowden & Another v QBE Insurance (Europe) Ltd [2017] EWHC 2597 (Comm)

the London Circuit Commercial Court held that a liability insurer was entitled to summary judgment against the third party Claimants who had commenced proceedings against it under the Third Parties (Rights Against Insurers) Act 1930.

The court held that a third party, standing in the shoes of an insolvent insured, had no real prospect of succeeding in an argument that the claim of the insolvent insured person fell outside the insolvency exclusion contained in the professional indemnity policy.

The decision casts further doubt on the contra proferentem rule in insurance exclusion clauses.

The application of the rule to such clauses was called into question by the Supreme Court in

Impact Funding Solutions Ltd v Barrington Support Services Ltd [2016] UKSC 57.

Here the court said:

“60. However, I am not aware of any authority where the Canada Steamship line of authority has been applied to an insurance contract. Nor was Mr Lilly able to identify any such authority. I suspect that this is for good reason, because these authorities are concerned with contractual attempts to exclude, restrict or limit primary liability which a party in breach of contract or guilty of tortious conduct would otherwise bear. The position in respect of insurance contracts is wholly distinguishable in that an exclusion clause in an insurance policy is not designed to exclude, restrict or limit a primary liability on the part of the insurer; instead, it is intended to define the risk which the insurer is prepared to accept by way of the insurance contract. Further, the exclusion clause in an insurance policy does not ordinarily operate to deprive the insured of rights which existed prior to or but for the cover afforded by the Policy.”

In that case, the Supreme Court held that the doctrine of contra proferentem related to exclusions which aimed to exclude or limit liability arising by operation of law, such as liability for negligence.

However, insurance exclusions are intended to define the risk which the insurer is prepared to accept.

Nevertheless, the narrow approach, that is applying the contra proferentem rule, may be appropriate where the clause, properly construed in the context of the particular insurance contract, is in fact an exclusion because it aims to limit or exclude the cover that the insurer intended to provide.

Thus there should be no automatic application of the contra proferentem doctrine.

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Written by kerryunderwood

December 13, 2017 at 11:20 am

Posted in Uncategorized

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