In Liberty Managing Agency Ltd & Others v Marwan Chedid & George Salibi [2026] EWHC 2354, the Commercial Court (Jacobs J) considered whether D&O insurers could avoid a policy and stop funding defence costs based on alleged fraudulent misrepresentation and fraudulent non-disclosure that had not yet been established by a final decision or formal written admission.

The court held that the insurers remained obliged to advance the defendants’ defence costs incurred in defending criminal proceedings. 

Background

The defendants, Marwan Chedid and George Salibi, are former Petrofac officers insured under Petrofac’s D&O programme. They have been charged with alleged bribery offences under the Bribery Act 2010, to which they have pleaded not guilty. Their trial is due to commence in November 2026. Defence costs had previously been funded under the primary and first excess layers of the programme, which were close to exhaustion. The dispute concerned the second excess layer, which provided cover of £45m in excess of £30m. 

In August 2026, the second excess insurers purported to avoid the policy as against the defendants, alleging fraudulent misrepresentation and fraudulent non-disclosure. Those allegations remain disputed and have not been determined by any court or tribunal.

The defendants argued that they could not fund their own defence and that the insurers remained obliged to advance defence costs. Given the proximity of the criminal trial, the court expedited the hearing of preliminary issues. 

Key issues before the Court

The dispute centred primarily on Clause 8.2 (Non-Avoidance) of the Policy, which provided that: 

"The Insurer shall not avoid this policy or any severable part of the policy or exercise any other legal remedy on the grounds of misrepresentation or non-disclosure, except with respect to (1) an Insured who has fraudulently misrepresented or fraudulently non-disclosed material information prior to the conclusion of this contract;…where such fraudulent conduct is established by a final decision of a court, tribunal or regulator or by a formal written admission of the Insured…” 

The principal issues before the Court were: 

1. Whether, on a proper construction of clause 8.2 and/or as a matter of public policy, the insurers could avoid the defendants’ cover before the alleged fraudulent conduct had been established by a final decision or formal written admission as specified in clause 8.2; and
2. Whether the costs of defending the bribery allegations were uninsurable as a matter of public policy.

Decision: The Court's construction of the non-avoidance clause

Clause 8.2 prevented avoidance pending a final decision or formal written admission 

The insurers argued that Clause 8.2 did not prevent them from immediately exercising the usual “self-help” remedy of avoidance. Jacobs J noted that avoidance ordinarily operates as a self-help remedy, allowing an insurer to avoid a policy without first obtaining a court decision. The key question was therefore whether Clause 8.2 contained sufficiently clear wording to alter that position and require a final decision or formal written admission before avoidance could be exercised. 

Jacobs J held that Clause 8.2 did. The concluding words of Clause 8.2 were not surplusage. They imposed an additional condition which had to be satisfied before the insurers could exercise any right of avoidance. In the absence of a formal written admission or a final decision of a court, tribunal or regulator, the insurers were not entitled to avoid the policy. The judge considered this interpretation consistent with the policy's conduct exclusion, which similarly required wrongdoing to be established before cover could be withdrawn.

Clause 8.2 was not contrary to public policy 

The insurers argued that, even if Clause 8.2 prevented avoidance pending a final decision or formal written admission, it was unenforceable on public policy grounds because parties cannot contract out of the consequences of fraud.

The court rejected that argument. Jacobs J held that the clause did not alter the consequences of proven fraud. If fraudulent non-disclosure or fraudulent misrepresentation in relation to the placement of the policy were established by insurers, the policy would (in the usual way) be avoided from inception and any defence costs already advanced would have to be repaid. 

Instead, Clause 8.2 regulated the position between allegation and proof, or what the court described as the 'gap' between present uncertainty and ultimate resolution. The court held that there was no public policy objection to parties agreeing how that interim period should be treated.

Defence costs for unproven criminal allegations were not uninsurable 

The court also rejected the insurers’ argument that defence costs arising from bribery allegations were uninsurable as a matter of public policy. Relying on Coulson v News Group Newspapers Ltd [2012] EWCA Civ 1547, Jacobs J held that there is no public policy objection to indemnifying the costs incurred in defending unproven criminal allegations. 

The judge saw no reason why that principle should apply differently in the context of alleged bribery. While bribery is a serious allegation, it does not follow that unproven allegations of bribery cannot be the subject of contractual indemnity. 

The court therefore distinguished between funding the defence of allegations which remain unproven and indemnifying the consequences of proven criminal conduct. The judge also noted that the policy expressly recognised the potential recoverability of defence costs arising from allegations of bribery by specifically referring to breaches of the Bribery Act 2010 within the definition of Wrongful Act in the Policy. 

Accordingly, the insurers remained obliged to advance the defendants’ defence costs falling within the scope of the policy, promptly on an as-incurred basis. 

Significance for D&O policy drafting and coverage disputes 

The judgment considers the operation of non-avoidance and final adjudication provisions commonly found in D&O policies. It confirms that where policy wording makes avoidance contingent on a final decision of a court, tribunal or regulator, or a formal written admission, allegations alone will not be sufficient to bring cover to an end. 

The decision also highlights the distinction between indemnifying the consequences of proven criminal conduct and funding the defence of allegations that have not yet been established. 

The Court has granted the insurers permission to appeal to the Court of Appeal.