UK: (Re)insurance Weekly Update 39 - 2016

Last Updated: 11 November 2016
Article by Nigel Brook
Most Read Contributor in UK, October 2017

A summary of recent developments in insurance, reinsurance and litigation law.

This Week's Caselaw

Merrix v Heart of England NHS: Judge holds that detailed assessment is still available where a costs budget has been approved

This is the first reported decision to have considered the relationship between costs budgeting and costs assessment. The receiving party here argued that if the costs claimed were at, or less, than the figure approved in its budget, the paying party would have to show that there is a good reason to depart from that figure, and those costs should otherwise be assessed as claimed, without further consideration. The paying party argued that the costs judge's powers and discretion are not fettered by the budgeted figure, but instead the budget is just one factor to be considered in determining reasonable and proportionate costs on assessment.

The judge agreed with the paying party. Costs budgeting is not intended to replace detailed assessment and the receiving party's last agreed or approved budget is just another factor that that the court will take into account: "No special weight is attached to that budget. The rules were not amended to say that "first consideration" would be given to the budget or that it would be "of paramount importance"".

The judge did not agree with either side's definition of a "budget", though: he said it did not mean a cap or a fixed amount, but instead was more of "an available fund": "The available fund is considered to be within the reasonable range of proportionate costs but nowhere is it stated to be a fixed assessed amount. If that had been the intention then the rules would surely state as much".

That said, the judge also held that this did not mean that the paying party had complete discretion to attack a bill on detailed assessment. Instead, the parties had a duty to help the court by narrowing the issues between them: "By adopting an ADR-like philosophy in negotiation and the preparation of budget discussion reports it should then be possible, in the majority of cases, to produce a proportionate budget that is so accurate when compared to the actual, yet still proportionate costs, incurred at the conclusion of the case that the difference between the parties should be so negligible that it would not be worth the time, trouble or risk to pursue a detailed assessment".

The judge noted that such an approach would benefit paying parties, such as insurers, as they will be able to reserve on a more accurate basis.

Lyons v Fox Williams: Judge holds solicitor was not retained to advise on coverage issue, scope of Long Term Disability claim

The claimant was injured in a road accident in Russia. He sought to claim under insurance policies taken out by his employer for the benefit of its employees. The claimant alleged that his solicitor's advice regarding his Accidental Death and Dismemberment ("AD&D") policy claim had been negligent, as the solicitor had only looked at the Members' Booklet, rather than the policy itself. That claim was settled (the judge finding that, had it gone to trial, he was satisfied that the solicitor would have been found to have acted negligently regarding that claim), but the claimant also alleged that the solicitor's handling of his Long Term Disability ("LTD") policy claim had also been negligent.

Turner J held that, on the facts of the case, the LTD claim had fallen outside of the scope of the solicitor's retainer. Nor was the solicitor under a duty to warn the claimant, nonetheless, of the scope and validity of the LTD policy. The solicitor had not become aware of a risk to the claimant relating to the LTD policy  and it was not objectively unreasonable for him to have omitted to flag up a risk. The LTD policy was legally distinct from the AD&D policy: "Perusal of and advice upon the latter did not require any knowledge of the scope or terms of the former".

The claimant had also alleged that his solicitor had been negligent in failing to include an English law and jurisdiction clause in a settlement agreement subsequently entered into between the claimant and his former employer. The judge held that it would have made no difference if the solicitor had warned the claimant about the disadvantages of omitting such a clause. The judge also found, on the facts, that the claimant had been aware of the position and accepted the risk.

For the sake of completeness, though, the judge considered what the position would have been under the LTD policy had the claimant been retained to advise about it, and whether the claimant might have been said to have lost a real and substantial chance to claim under that policy. Various arguments were raised by the defendant, including the following:

(1) The claimant's argument that he would have reduced his salary to less than 80% to claim under the policy would not have worked because the insurer would have seen the move as being artificial and could have resisted the claims for benefit as a deliberate and legally impermissible attempt to bring about the circumstances to trigger his entitlement to claim under the policy. The judge described that as a "relatively remote risk", though, given the extent of the claimant's injuries: "The extent of the claimant's injuries and the impact which they had upon him and his work could very probably have been presented both plausibly and legitimately as a justification for reducing his salary. The fact that [his employer] continued to pay his full salary does not prove that it would have been improper for them to have chosen not to". It was held that the claimant could have recovered for loss of chance in the period immediately leading up to his leaving work.

(2) The claimant had ceased to be an employee after entering into the settlement agreement with his employer (instead becoming a part-time consultant). The defendant argued that he was therefore no longer an "insured" under the LTD after that time. That argument was also rejected by the judge: "To hold otherwise would lead to absurd results under which a totally disabled employee would have to be maintained in employment to be eligible and remain eligible to receive benefits under the policy. The defendant's interpretation is unsustainable and would lead to consequences which would be liable to defeat the whole purpose of the scheme with those most severely disabled being the most likely to lose out". 

On the facts, had the claimant succeeded in the underlying claim, the judge said he would have applied a discount to reflect the loss of a chance at the level of 50%.

Kazakhstan Kagazy v Zhunus: Court of Appeal holds freezing injunction can be granted in aid of a contribution notice

The claimant alleged fraudulent conduct against two defendants. Defendant 1 settled with the claimant and defendant 2 (plus another defendant) then sought permission to serve a contribution notice on defendant 1 (seeking a contribution if they were eventually held liable to the claimants, on the basis of allegations made by the claimants against defendant 1). The judge refused permission for the service of a contribution notice and also declined to make a freezing order against defendant 1, on the basis that there were no proceedings in existence to support that application. The Court of Appeal has now allowed the appeal from that decision, finding as follows:

(1) Although defendant 2's primary case was that there had been no fraudulent conduct at all, he was entitled to formulate an alternative case that, if he was held liable and there was fraudulent conduct, defendant 1 was fraudulent as well. The mere fact that defendant 1 had settled with the claimant, did not mean that proceedings for contribution could not be initiated or continued (see section 1(3) of the Contribution Act 1978). It did not matter that a finding that defendant 2 was liable did not necessarily mean that defendant 1 was liable as well.

(2) In relation to the freezing order application, the judge had held that, since defendant 2 had no cause of action until he is held liable, no freezing order can be granted because there are no existing proceedings until that point. Although reference had been made to a string of cases in which an accrued cause of action was required before a freezing order could be granted, those cases: "were not, however, considering cases in which it was appropriate for proceedings to be issued, despite the absence of a cause of action in its strictest sense". The Court of Appeal went on to hold that "there may be cases in which an injunction can be granted even if a cause of action (in its strict sense) does not yet exist, if it is nevertheless possible to issue proceedings, as it is with contribution notices. Alternatively, one can say that if a co-defendant is entitled to issue and serve a contribution notice, he has a cause of action for so doing. Either way it is obvious good sense that in a proper case a freezing injunction can be issued in support of a valid contribution notice and obviously inconvenient if it cannot be so issued".

(3) Although it is necessary to come to court with "clean hands" (and benefits should be denied to those who have acted fraudulently), it was not possible to say that contribution would never be ordered in this case. There can be orders for equitable contribution between fraudsters (especially if one has benefited more than the other). Accordingly, all the freezing order did was hold the current position, so that defendant 1 could not dissipate assets.

Leslie v Farrar Construction: Court of Appeal summarises law relating to over-payment by mistake

The claimant appealed against a decision that he was not entitled to recover overpayments of building costs. The Court of Appeal, when handing down its judgment, usefully restated and summarised the position regarding payments under mistake.

Various defences may be raised to counter the general position that a claimant may recover money paid to a party by mistake. The key one which was of relevance in this case is that: "where C voluntarily makes a payment to D knowing that it may be more than he owes, but choosing not to ascertain the correct amount due, he cannot ordinarily recover that overpayment. I say "ordinarily", because different considerations arise if there has been fraud or misrepresentation. There is no plea of fraud or misrepresentation in the present case".

In this case, the claimant had made a conscious decision to pay the requested sums without investigation, because it suited his purposes. He had not wished to devote further resources to "grinding through the figures" with accountants. Accordingly, his appeal failed.

The Court of Appeal also noted that where parties settle litigation, or otherwise reach an agreed settlement, they must accept the consequences of what they have agreed, even if the law subsequently changes to one side's advantage, or it turns out that one side made a bad bargain.

(Re)insurance Weekly Update 39 - 2016

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Nigel Brook
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.