Fidelity Insurance - Ascertaining the Date of Discovery

(La Positiva Seguros y Reaseguros SA v Jessel, September 2000 and forthcoming in [2001] Lloyd’s Rep IR)

Fidelity policies, which provide the assured with an indemnity against losses caused by the fraud of employees, directors and officers, are commonly written on a “discovery” basis. The effect is that frauds discovered during the currency of the policy are within its scope, whereas frauds discovered at some earlier point are excluded from the policy and are either uninsured or possibly insured by a previous policy. Until recently there had been no discussion in the English courts as to the meaning of the word “discovered”. It is for this reason that the decision of His Honour Judge Raymond Jack QC, Deputy High Court Judge in La Positiva Seguros y Reaseguros SA v Jessel , September 2000 and forthcoming in [2001] Lloyd’s Rep IR, has taken on great significance. This was a claim by fidelity insurers against their reinsurers, the key question being whether the insurers were liable to their own direct assured.