Rathbone Brothers Plc & Anor v Novae Corporate Underwriting & Ors

Professional indemnity cover may extend to a trustee who provides services on behalf of an insured company, even where the trustee acts in a personal capacity. Services are provided pursuant to an agreement for compensation if the relevant trust arrangement requires payment, and the policy need not require that the agreement be made by the insured company itself.

Direct control and supervision are compatible with the lawful exercise of trustee discretion where they ensure compliance with professional and regulatory obligations. An excess clause referring to insurance and indemnification from any other source does not, without clear words, require recovery first from the policyholder or a co-insured. Subrogation arises only after payment, and may be barred against a co-insured in respect of the same loss.

The claimants sought declarations under an excess professional liability policy concerning claims brought in Jersey against the second claimant, a former personal trustee of the Walker Trusts. The insurers disputed whether he was an insured person, whether his trustee services were professional services performed on behalf of the insured company, and whether he remained an employee after entering a consultancy agreement.

The insurers also relied on an excess clause, other insurance, indemnities, and subrogation rights. The court was required to determine the scope of cover from 31 March 2000 to 15 October 2008 and the parties’ respective rights under the policy.

1. Cover. The claimant was an insured person in respect of the alleged wrongful acts. When acting as personal trustee, he acted on behalf of the insured company. The company recorded and billed his time, and its indemnity recognised that he acted in that capacity.
2. The trustee services were provided pursuant to an agreement with a third party for compensation. The policy did not require the agreement to have been made by the insured company. The trust settlement and the subsequent billing arrangements were sufficient.
3. Direct control and supervision did not require absolute control or interfere unlawfully with trustee discretion. Monitoring and compliance arrangements designed to ensure that a trustee performed his duties and complied with the Jersey Codes of Practice were lawful and consistent with the trustee’s role.
4. The claimant remained a paid employee for the purposes of the policy after 2007. The consultancy agreement’s description as a contract for services was not determinative. His remuneration, calculated by reference to time spent and fees billed, was not remuneration on a sales or commission basis.
5. Excess clause. The reference to insurance and indemnification from any other source included indemnities generally, but did not include indemnification from the policyholder or another co-insured. The claimant was therefore not required first to proceed against the indemnity given by the policyholder. A possible indemnity from a non-insured successor company was left unresolved.
6. The directors’ and officers’ policy excluded liability arising from professional services. That exclusion also excluded defence costs relating to a claim falling clearly outside the policy.
7. Subrogation. The wording providing for subrogation before or after payment did not create an enforceable right of subrogation before payment. The insurers could exercise subrogation against the policyholder after paying the claimant, but not against the insured company in respect of the same loss, because the co-insurance defence applied.
8. Judgment was accordingly given that the claimant was covered, subject to the applicable policy limit, was not required first to proceed against the policyholder’s indemnity, and could be subject to subrogation against the policyholder after payment.