UK: High Court Rules Limited Liability Partner not Liable for Firm's Indemnity Insurance Premium

    In Zeckler v Assigned Risk Pool Manager Capita Commercial Services Ltd [2012], the High Court held, on appeal, that the Solicitors Indemnity Insurance Rules 2009 r.10.3 (the Rule) could not be relied upon to hold personally liable a partner in a limited liability partnership for the partnership's unpaid professional indemnity insurance premiums.

    The appellant (Zeckler) had been one of two partners in a limited liability solicitors' practice, Zecklers LLP. The practice had contracted with the respondent (ARPMC) for the provision of professional indemnity insurance. However, premium payments fell into arrears and ARPMC issued a statutory demand against Zeckler for the unpaid premiums due.

    The Rule provides that "the Firm and any person who is a Principal of that Firm agrees to, and... shall be jointly and severally liable to pay the ARP Premium... to the ARP Manager under the ARP Policy...".

    Zeckler contested neither the existence nor the amount of the debt in question, instead disputing only the liability of him personally for the debt. Zeckler submitted that his status as a limited liability partner exempted him from personal liability for the debt of the practice. With no personal contract between Zeckler and ARPMC, and no express contractual term stipulating a personal liability to exist between the parties, Mr N. Strauss Q.C. (sitting as a Deputy Judge) held that Chief Registrar Baister had erred at first instance in dismissing Zeckler's application to set aside the statutory demand.

    It was held that, although the Chief Registrar was right to attempt a sensible construction of the wording of the Rule, the Rule failed to overcome the problem of demonstrating how it becomes binding as between Zeckler and ARPMC. Further, it was held that professional rules would not normally be incorporated into a contract unless expressly stated to that effect in the contract itself. The statutory demand would therefore be set aside.

    This case highlights the importance of incorporating clear, express wording in a contract when seeking reliance on a position that may not otherwise be implied.

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