When is a premium earned?

In Clydesdale Financial Services Ltd v Smailes [2009] EWHC 3190 (Ch) David Richards J discussed the operation of personal injury litigation funding arrangements which involved two separate insurances. The primary question which arose related to the date at which a premium was earned. The court had to decide only whether there was a good arguable case on the various issues, so the c ourt did not reach a concluded view on those issues.

Clydesdale: the contractual arrangements

Solicitors ASLLP’s business consisted of making and pursuing claims for damages for personal injury in road traffic and employers’ liability cases, on a conditional fee basis. After the event insurance was obtained by ASLLP from a number of insurers, including Focus, and this operated to fund the claims brought by ASLLP on behalf of its clients. ASLLP’s own handling of those claims was funded by loans from a number of lenders, including Clydesdale. A loan could be repaid in the event that a claim succeeded, because ASLLP’s costs would be paid by the losing defendant. However, if a claim failed, ASLLP would not only be deprived of its fees but also would have expended various irrecoverable sums, including overheads: accordingly, ASLLP itself obtained financial guarantee insurance from Focus and others, to cover its own losses in the event that a claim failed.