UK: ATE Insurer Liable to Solicitors Under ‘No Win, No Fee’ Guarantee

In the recent case of Greene Wood Mclean LLP v Templeton Insurance Ltd (2010) EWHC 2679 (Comm), the Commercial Court considered whether Templeton was liable to GWM, a firm of solicitors, under an after-the-event (ATE) insurance policy.

GWM were instructed by a number of miners to seek recovery of monies from trade unions and solicitors, who had made deductions from compensation paid to the miners. GWM agreed to act under conditional fee agreements and provided the miners with a guarantee that they would not incur any legal costs. The firm then arranged ATE insurance with Templeton on the miners’ behalf to cover their claims.

As there was a large number of claims, all with relatively small monetary values, GWM took the decision with counsel to apply for a group litigation order (GLO). This application was dismissed and costs were awarded against the miners.

Templeton claimed that the policy was void ab initio and refused to pay the miners’ costs and GWM’s disbursements. A number of the miners then intimated claims against GWM for negligence and breach of the guarantee which GWM settled. Under the terms of the settlements, the miners undertook to assign to GWM all their rights and entitlements under the ATE policy. However, when GWM sought to recover the settlement payments from Templeton, they were unable to do so because of a non-assignment clause in the ATE policy. GWM thus commenced the present action against Templeton seeking indemnification. Templeton counter-claimed alleging that GWM and counsel had breached the duty of care owed to Templeton by negligently bringing the GLO application.

Mr Justice Cooke found Templeton liable to GWM for the policy limit of £1 million, plus interest for the following reasons:

1. There was no implied term in the arrangements between GWM and Templeton that Templeton would meet valid claims under the policy. Such a term was not necessary to give business efficacy to the agreement nor would an officious bystander have recognised such a term. The miners, as insureds, were able to bring an action against Templeton if Templeton failed to pay under the policy. There was no need for the solicitors who arranged the policy to be able to bring an action against the insurers.

2. The ATE policy and GWM guarantee were made in the full knowledge of the existence of the other and there was no doubt that the primary liability to the miners lay with Templeton. Cooke J agreed that this was clearly the understanding of the parties. As such, GWM could rely on the principle of law that wherever one party is compelled to discharge the liability of another by the legal default of that second party, the first party has a claim to be indemnified by the second party. Consequently, GWM had a restitutionary claim against Templeton.

3. GWM also had a claim against Templeton for contribution under the Civil Liability (Contribution) Act 1978, as they were both liable for the same damage, namely the miners’ liability for adverse costs and disbursements.

4. Neither GWM nor counsel owed Templeton any duty of care. In any event, Cooke J did not agree that GWM or counsel had been negligent in bringing the GLO application and concluded that their decision was justifiable.