A consortium of 11 professional indemnity insurers will have to pay around £100m to Standard Life after losing their case in the Court of Appeal in December 2012.

The case centred on compensation payments made by Standard Life to 97,000 of its policyholders after the Standard Life Pension Sterling Fund lost 5{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} of its value during the credit crunch in 2009. Standard Life claimed the cost of the compensation against its professional indemnity insurance policy but the insurers declined the claim arguing they were not liable.

Standard Life took the consortium to London’s Commercial Court in 2011 which ruled in favour of the life insurer. The consortium appealed, but has now lost. It has 28 days from the date of the decision to seek leave to appeal to the Supreme Court.

The £2 billion Standard Life Pension Sterling Fund was marketed as a low risk cash-based investment, but it had around 13{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} invested in sub-prime mortgages when it was hit by the Lehman Brothers crash. This led to significant losses for investors. Standard Life quickly compensated its investors following hundreds of complains and suffering reputational damage.

Standard Life’s insurers said they were not liable because the compensation payment was not incurred necessarily and that the life insurers’ motivation was partly “to protect the brand or reputation of the company”. Standard Life countered that it had acted to avoid potentially larger losses, and that its PII cover allowed it to take “action to avoid a third party claim or to reduce a third party claim”. Details of the case were published in the Herald Newspaper and Money Marketing.

“It’s good to see the courts coming down on the side of the policyholder”, said James Burgoyne, director, Brunel Professional Risks. “We had no involvement in the Standard Life case, but we do fight hard on behalf of every single one of our clients when they have a professional indemnity insurance claim to make sure they are fully compensated for any losses.”