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R v Financial Services Compensation Scheme, Ex-Parte Geologistics Limited, Court of Appeal, 18 December 2003

24 December 2003
The issues

Policyholders Protection Act 1975 – Insurance – Insolvent Insurer.

The facts

Geologistics had an Employers Liability Policy with the Independent. The claim was made by an employee. Geologistics were unable to recover under the Policy; either the damages payable to the employee, the costs payable to the employee, or the costs incurred defending the claim. Under Section 6(iv) and (v) of the Policyholder’s Protection Act 1975, the Financial Services Compensation Scheme had to indemnify Geologistics for damages and costs for which Geologistics were liable to the employee. The Scheme argued that it did not have to pay the costs that Geologistics had to pay its own Solicitors because it was not a liability arising “in respect of a liability of the Policyholder subject to compulsory insurance” within Section 6(v). The Judge at first instance disagreed. The matter came before the Court of Appeal.

The decision

1. The 1975 Act was not to be construed on the basis that its sole or primary aim was to protect third party victims as opposed to indemnifying corporate policyholders.

2. It was usual for an Employers Liability Policy to cover both damages and Claimants and Defence costs.

3. In this case, the original Policy provided for the recovery of Defence costs. When the Independent became insolvent, those costs were within the meaning of Section 6(v) as incurred in respect of “a liability subject to compulsory insurance” because they were descriptive of the type of liability covered by the Policy.

Appeal dismissed.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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