A reminder to accountants and tax advisers: Know your policy terms

The judgment has recently been handed down in Ahmed v White & Co (UK) Limited (White & Co).

The claim was brought by 176 former clients of White & Co against them and their professional indemnity insurer, Allianz, pursuant to the Third Parties (Rights Against Insurers) Act 2010. The claimants alleged that they had been given negligent advice by White & Co in relation to investments into a range of tax mitigation schemes, which they said all substantially failed, causing them a loss. 

The claim against White & Co did not proceed due to its insolvency, but progressed against Allianz and the ARP Defendants, who subsequently settled ahead of trial. 

The key issues

The trial dealt with the key question: if it were assumed that White & Co were liable, would Allianz be required to indemnify White & Co. The focus was on:

• The scope of the claims.
• Requirements for notification. 
• Scope of aggregation.
• The tax mitigation endorsement.

The court’s findings

The claimant’s case on notification turned on a series of three communications sent on their behalf. Ultimately, the court found that none of the notifications were valid under the policy terms. 

When coming to this conclusion, the court considered the scope of notifications relied upon, and whether solicitors instructed by White & Co. and Allianz had acted as their agent for notification purposes. 

Alternatively, the court found that either:

• Under the “related claims” clause of the policy, the majority of the individual claims were deemed to be a single claim on the basis that they were “arising out of, based upon, or attributable to the same facts or alleged facts, or circumstances or the same Wrongful Act, or a continuous repeated or related Wrongful Act”; or 
• By virtue of the “tax mitigation endorsement” were to be aggregated because the endorsement provided that claims arising from investments, which were “pre-planned, artificial transactions designed to achieve a specific tax outcome', were subject to a single limit of indemnity”.

Key takeaways for accountants, tax advisers, brokers and insurers

The decision serves as a reminder that businesses must understand their policy terms and have clear procedures in place for identifying circumstances that require notification, so that this can be done promptly, in accordance with the policy terms.