Disbursements funder’s claim fails

A disbursements funder has lost its claim for repayment in a case concerning a law firm that failed to perform its professional duties.

Impact Funding Solutions v AIG Europe Insurance (formerly known as Chartis Insurance (UK)) [2016] UKSC 57 concerned the construction of an exclusion clause in a professional indemnity policy relating to “loss in connection with any claim”.

Impact had a disbursements funding master agreement with solicitors, Barrington Support Services, now insolvent. Impact provided funds to Barrington to hold on behalf of clients pursuing industrial deafness claims. However, Barrington failed to adequately investigate the merits of their claims. This meant Barrington’s clients could not repay their loans to Impact.

Delivering the lead judgment, Lord Hodge held that the clause did apply. He said: “Excluding such a claim creates no incoherence in the policy, as it is the combination of the opening clause and the exclusions that delimits AIG’s contractual liability.”