A dispute over the amount a solicitor’s professional indemnity insurer must pay out for a series of similar claims lies at the heart of long awaited court case.

Now solicitors and their insurers will have to wait a little longer after the case was adjourned following the related criminal trial which saw a dishonest solicitor jailed for 12 years for mortgage fraud.

Solicitor Jonathan Gilbert of law firm Willetts was jailed for his part in the fraud. He acted in multiple mortgage transactions where mortgage lenders paid the mortgage advance to Willmetts, but the property transaction did not proceed resulting in the lender losing its money.

Godiva Mortgages is now suing Willmetts’ insurer, Travelers, after the insurer decided that some 350 claims at the centre of the case would be aggregated for insurance purposes. This meant that the insurer could treat all the claims as a single loss and apply a single claim limit of £2 million. The decision left Godiva and other mortgage lenders, which had been defrauded out of £30 million, facing significant uninsured losses.

Travelers is arguing that all the losses can be treated as a single claim as Jonathan Gilbert had carried out ‘similar acts or omissions’ in the transactions which were related as they all formed part of the same fraudulent enterprise. In reply Godiva is contesting that its relationship with Willmetts was independent of any that the firm had with other mortgage lenders and that its claim should not be aggregated. Both the Law Society and the SRA have obtained permission to intervene in the case citing concerns about protection of clients.

“This is an important case for the solicitors’ professional indemnity insurance market,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “On the one hand insurers do not want to pay out more than they need to for a claim, while on the other the SRA and Law Society are worried about solicitors’ clients being left out of pocket. Given that the SRA is proposing a cap on insurers’ liabilities potentially as low as £1.5 million in its new minimum terms this issue has far reaching implications. The outcome could have a significant impact on the future availability and price of professional indemnity insurance for solicitors.”

Further details of the case can be read in DAC Beachcroft’s Insurance Adviser Alert.