Court Decides Insurer Can Be Joined To A Liability Trial Involving Its Insured

In Managed Legal Solutions v Mr Darren Hanson (trading as Fortitude Law) and HDI Global Specialty SE [2025] EWHC 2645 (Comm), a professional indemnity insurer succeeded in being joined to a liability trial involving its insured to allow it to be heard on a particular issue affecting coverage. In this case, the insured was debarred from defending the claim and so the Court allowed the insurer's application to be joined to the proceedings under CPR 19.2 on the basis that the insurer had an interest in the outcome of the proceedings which would not be advanced unless it was joined.

HSF Kramer (Will Glassey, Partner and Kate Mann, Senior Associate) acted for the successful professional indemnity insurer in this case, HDI Global Specialty SE (HDI).

BACKGROUND

HDI was the professional indemnity insurer of a sole practitioner solicitor, Mr Darren Hanison trading as Fortitude Law (Fortitude). Fortitude faced an multi-million pound damages claim brought by a litigation funder, Managed Legal Solutions Limited (MLS) related to failed group litigation conducted by Fortitude in which MLS provided funding and security for costs (the MLS Claim).

HDI denied that it was liable to indemnify Fortitude for the MLS Claim on the basis that the so-called "trading debts exclusion" in the policy was triggered (relying on the closely analogous decision of the Supreme Court in 2016 in Impact Funding Solutions Limited v AIG Europe Ltd [2016] UKSC 57.

Fortitude was absent from the case. At the time of the hearing, Mr Hanison (trading as Fortitude) was not bankrupt, but if the MLS Claim were to succeed, it was anticipated that bankruptcy would follow, and MLS would likely pursue HDI directly under the Third Parties (Rights against Insurers) Act 2010 (the 2010 Act).

The coverage arbitration on foot between Fortitude, MLS and HDI was currently stayed, pending the outcome of the underlying MLS Claim.

Upon learning that Fortitude had been debarred from defending the MLS Claim for procedural non-compliance, HDI sought to be joined as a defendant to the MLS Claim under CPR 19.2 so as to be heard on a single liability issue pleaded by MLS against Fortitude, namely, whether Fortitude owed to MLS, as a litigation funder, a tortious duty of care. It was common ground that HDI had an interest in that issue because its outcome would likely determine whether the trading debts exclusion applied to the MLS Claim. MLS sought, to the contrary, to be able to litigate the liability issues against an 'empty chair' without the liability insurer being heard.

HDI's joinder application was opposed by MLS.

CPR 19.2 or CPR 19.6?

HDI's application was made under CPR 19.2 which provides:

MLS contested the application arguing that it instead fell to be considered under the more restrictive criteria set out in CPR 19.6, which "applies to a change of parties after the end of a period of limitation under...the Limitation Act 1980".

MLS said that HDI's application was made after the end of a limitation period because the relevant claim for that purpose is the claim by MLS against Fortitude for breaches of the tortious duty, the limitation period for which, it said, had now expired.

HDI argued, on the other hand that:

• the relevant 'claim' for the purposes of determining which rule applies to HDI's joinder application was the potential claim by MLS (as a transferee pursuant to the 2010 Act of Mr Hanison's rights) against HDI; and
• the limitation period applicable to such a claim had not yet ended (indeed it has not yet started to run pending the establishment of Fortitude's liability to MLS per section 12 of the 2010 Act).

HDI also argued further, and in the alternative, that because the addition of HDI as a party to the proceedings did not involve a new cause of action, CPR 19.6 did not apply in any event (relying on the Court of Appeal in Yorkshire RHA v Fairclough Building Ltd [1996] 1 WLR 210, CA, per Millett LJ (as he then was) at 218F that s.35(2) Limitation Act 1980 does not include claims involving the addition or substitution of a new party but which do not involve a new cause of action).

DECISION

The Court rejected MLS's submission that CPR 19.6 governed the application. It held that to apply CPR 19.6 by reference only to the limitation period applicable to MLS's claim against Fortitude as though it were being pursued by MLS against HDI (in circumstances where MLS has no present entitlement to pursue such a claim), would fail to reflect that HDI's interest in the proceedings was because of its potential exposure to a claim under the 2010 Act. It therefore accepted HDI's position that the relevant claim was MLS's prospective claim against HDI under the 2010 Act, which would arise only if Fortitude's liability was first established, and was therefore not yet time-barred. The Court also accepted HDI's alternative argument that CPR 19.6 did not apply, in any event, because adding HDI did not introduce a new cause of action.

The requirements of CPR 19.2

MLS also asserted that, even if CPR 19.2 were to apply, the application should be refused on the basis that the requirements were not satisfied (i.e. that it was not "desirable" to do so).

The Court confirmed that the authorities (in particular, Wood v Perfection Travel [1996] IRLR 233, CA) show that there is jurisdiction in an appropriate case to add an insurer to the liability proceedings against the insured, to make submissions in the insurer's own interest where there is a conflict of interest between the interests of the insurer and the insured. Applying the broad, purposive approach to CPR 19.2 in In Re Pablo Star [2018] 1 WLR 738, the Court held it was desirable to add HDI. HDI had a direct, material interest in the tortious duty issue, Fortitude had been debarred, and without HDI the point would go effectively uncontested. It also addressed and rejected MLS's objections based on alleged delay, prejudice, and supposed complexity, finding both that HDI acted promptly once the debarring position crystallised and that joinder serves the overriding objective.

COMMENT

Where an insured is debarred or is otherwise not defending a claim against it and an insurer faces a material, direct exposure contingent on the outcome, this case confirms that in an appropriate case, CPR 19.2 can facilitate joinder so the insurer can be heard on liability issues linked to its interest.

MLS sought leave to appeal, which the Judge has granted, citing the lack of authority on both points as justifying the grant of leave. MLS's opposition to the joinder of HDI will therefore progress to the Court of Appeal.

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