CROWDEN AND ANOTHER V QBE INSURANCE (EUROPE) LTD

[2017] EWHC 2597 (Comm), Queen's Bench Division, Commercial Court, Peter Macdonald Eggers QC, 19 October 2017

Insurance (Professional indemnity) - Exclusion for insolvency - Principles applicable to interpretation of insurance exclusions - Causation - Effect of assignment of rights to Financial Services Compensation Scheme - Third Parties (Rights Against Insurers) Act 1930 - Financial Services and Markets Act 2000

The claimants operated the Crowden Executive Pension Scheme, and engaged Target Financial Management Ltd to provide investment advice. In 2005 advice from Target led the Claimants to invest £200,000 in the Keydata Bond, which gave them a direct, participating interest in an underlying bond issued by SLS Capital SA. On 2 June 2009 Keydata defaulted and was later wound up. The claimants recovered £84,642.92 from the Financial Services Compensation Scheme, about one-half of the alleged loss. In 2008 advice from Target led the claimants to invest £150,000 in the Meteor Plan, under which they acquired securities issued by Lehman Brothers Inc. On 15 September 2008 Lehman entered into Chapter 11 protection in the United States, causing an alleged loss of £50,000. A claim was made against the FSCS but it was rejected. At the end of 2011 or the beginning of 2012, Target entered into administration and it was wound up in May 2013. A claim was made against the FSCS and some £77,598.11 was awarded in respect of the Keydata advice although nothing was recovered in respect of the Meteor advice. The claimants commenced proceedings against Target in May 2014. The proceedings were not defended and the claimants obtained a judgment in the sum of £197,698.05. The claimants sought to enforce the judgment against Target's liability insurers, QBE under the terms of the Third Parties (Rights Against Insurers) Act 1930. QBE argued that it was not liable to Target, by reason of an Insolvency Exclusion under which the policy "excludes and does not cover any claims, liability, loss, costs or expenses: ... arising out of or relating directly or indirectly to the insolvency or bankruptcy of the Insured or of any insurance company, building society, bank, investment manager, stockbroker, investment intermediary, or any other business, firm or company with whom the Insured has arranged directly or indirectly any insurances, investments or deposits ..."