OLDHAM V QBE INSURANCE (EUROPE) LTD

[2017] EWHC 3045 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Popplewell, 1 December 2017

Insurance (professional indemnity) - Liability of insurer to pay defence costs - Coverage dispute resolved by arbitrator in favour of insurers - Whether assured required to repay defence costs - Serious irregularity in award on costs - Extension of time for appeal - Arbitration Act 1996, sections 68, 69, 70 and 80

In 2008 O was one of three administrators of MK Airlines. In 2009 it was asserted by the liquidators that fees had been wrongly been paid to him. In September 2014 proceedings were commenced against O seeking to recover £850,000. In October O gave notice to his liability insurers on risk for a year from February 2014. The policy responded to claims first made against O during the period of coverage, and provided defence costs coverage in addition to any indemnification for liability. The policy provided that in the event of a dispute concerning liability, the insurers agreed to "advance defence costs ... pending resolution of any such dispute". Disputes under the policy were to be referred to arbitration. In August 2015 QBE declined coverage on the ground that the claim was first made in an earlier year. Arbitration was commenced. On 5 October 2016 the High Court gave judgment against O for £1.03 million plus £100,000 on account of costs, although permission to appeal was granted. On 7 October 2016 the arbitrator issued an award holding that there was no coverage, that O should repay the money advanced for costs and that O should bear the costs of the arbitration, although in the absence of any submissions on costs there was no quantification. The arbitrator then gave a second award ordering the payment of costs on account before O had had an opportunity to make representations. O sought permission to appeal against the first arbitration award for error of law, and also appealed against the awards on the grounds of serious irregularity. As the 28 days for appeal had expired, it was also necessary for O to seek an extension of time.