The Court of Appeal in European Risk Insurance Company HF v Collette Ann McManus & Ors  EWHC 18 (Ch), has upheld a High Court judge’s decisions to a) refuse declaratory relief and b) award the claimants 60% of the costs of the hearing, stating that the first instance judge had given detailed and rational explanations for her decision to withhold the declaratory relief sought and that it could see no basis for interfering with this exercise of her discretion on either this or the issue of costs.
The first instance judge had considered whether to issue a declaration stating that a blanket notification of circumstances which may give rise to claims, had been validly made to European Risk Insurance Company (the Defendant). The notification was made by Collette Ann McManus and others (the Claimants) as partners of a law firm (MSR), which sought coverage from the Defendant for potential claims arising from the work of a firm it had acquired through a take-over in 2011(S&F). A review of S&F’s files since the takeover had shown a ‘consistent pattern of breaches’ in its work. MSR sought to notify ‘circumstances which may give rise to claims’ in relation to all the files taken over from S&F (estimated at 5,000 in number), but the Defendant rejected all but a small handful which had either already resulted in claims, or contained similar facts and parties. The Defendant said that it required MSR to identify the specific incident on each notified file which would give rise to a claim, and that it was not sufficient to state only that S&F had worked on a matter.
The first instance judge found this rejection was “clearly wrong” and at odds with the case law, which did not support the Defendant’s view that a notification of circumstances must identify the specific incident which may lead to a claim. The judge refused declaratory relief to the Claimants, however, as there was evidence that MSR’s review of a sample of S&F files (undertaken before it issued notification) had been faulty, and that a smaller proportion contained errors than initially thought. In light of this, and other factors, it would have been impossible to issue a declaration of any real value, which was not broader or narrower than the evidence justified. She stated that issues about the limits of the circumstances notified and the range of claims that might be said to arise from them were matters better left to be determined if and when a claim arises.