Cases on the anti-deprivation rule are coming with increasing frequency. In the latest case, reported as Folgate London Market Limited (formerly Towergate Stafford Knight Co Limited) v Chaucer Insurance PLC [2011] EWCA Civ 328, an insurance broker had agreed to indemnify a company against liability in respect of a personal injury claim where the insurers had declined cover on the basis of an exception in the policy. The agreement contained a provision that the right to an indemnity would cease if the company went into administration.
When the company entered administration and the administrator sought to enforce the indemnity, the court held that there was no reasonable justification for terminating the indemnity purely on the grounds of entering administration (as there would be, for example, if the company was obliged to provide continuing assistance to the broker which it would be unable to provide in the event of its insolvency) and the reason for the termination was apparently simply to avoid paying purely for the benefit of the company’s creditors.
The Court of Appeal confirmed the first instance decision that this provision infringed the anti-deprivation rule and was therefore unenforceable. Such contracting out of the insolvency legislation is contrary to public policy.
