The Court of Appeal in AmTrust Specialty Ltd v Endurance Worldwide Insurance Ltd [2025] EWCA Civ 755 considered whether a judge at first instance had erred in a decision to refuse Extended Disclosure of a particular category of documents potentially relevant to the construction of a professional indemnity policy.
The appeal was allowed, the Court of Appeal ordering the disclosure of correspondence between an insurer and two insured firms of solicitors prior to the inception of their professional indemnity policies. The decision provides guidance as to the court's approach to determining whether it would be reasonable and proportionate to order Extended Disclosure, having regard to the overriding objective, and confirmed that there is no threshold test of relevance. The Judge in this case was criticised for failing to consider the factors listed in PD57AD in considering whether Extended Disclosure is necessary.
In considering Extended Disclosure, the Court of Appeal rejected the argument that the pre-contractual correspondence between the insurer and its insureds could not be relevant to the construction of a policy, noting that in this case the fact that the relevant policy clauses might be in standard form and modelled on minimum terms was not determinative of the proper construction of those clauses. At trial, the court will need to consider the construction of the particular policies and whether, in the circumstances of the particular case, the terms cover the claim.
BACKGROUND
The disclosure dispute arose against the backdrop of a failed litigation funding scheme. The funder, Novatis, says that it has lost £56m on approximately 10,000 cases put through the scheme. Novatis claims either that full amount, or in the alternative, £22m from AmTrust, which provided ATE insurance for the scheme, covering certain disbursements and any adverse costs. AmTrust in turn seeks to blame the Scheme Solicitors, alleging, in essence, that they failed adequately to assess the merits of claims admitted to the scheme. The two firms of Scheme Solicitors are both in administration, and AmTrust is claiming directly under their professional indemnity policies (the Policies) proceeding directly against their insurer, Sompo, under the Third Parties (Rights against Insurers) Act 2010.
The case is scheduled for a five-week trial of preliminary issues in November 2025. This decision concerned AmTrust's application for Extended Disclosure of correspondence between the Scheme Solicitors and Sompo at the time the firm's professional indemnity policies were placed. AmTrust argued – ultimately successfully – that that correspondence should be disclosed by Sompo to enable determination of the following insurance coverage issues between AmTrust and Sompo:
- Whether the liabilities alleged by AmTrust fell within the insuring clause of the Policies being civil liabilities arising out of and/or in connection with “the conduct of any Professional Business (as defined) carried on by, or on behalf of the Insured”,
- Whether such liabilities were excluded by a clause in the Policies which excludes cover for claims “arising out of or in connection with any…legal liability assumed or accepted by the Insured under any contract of agreement for the supply to, or use by the Insured of goods or services in the course of Professional Business (as defined)”, and
- Whether such liabilities were excluded by a clause in the Policies which excludes any claim “arising out of or in connection with any…guarantee, indemnity or undertaking given by or on behalf of the Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to the Insured”.
AmTrust prays in aid the Policies' Incorporation Clause, which states that "Whereas a representative of the Insured has made to the Insurers a written proposal containing particulars and statements made to the best of the representative's knowledge and belief which, together with any other information supplied to the Insurers shall be incorporated into this contract."
FIRST INSTANCE DECISION
At the CMC, Mr Peter MacDonald Eggers KC, sitting as a deputy Judge of the High Court, made a wide-ranging order for disclosure but refused to order Extended Disclosure of the insurance placement correspondence.
The Judge began by asking himself what the Court would have to consider when determining the meaning of the insuring clause. He was sceptical as to the relevance of the placement correspondence for that purpose, and concluded that the meaning of particular phrases could not be affected by the placement correspondence, whether those materials were incorporated into the Policies by the Incorporation Clause or were part of the relevant factual matrix.
The Judge also stated that he was not satisfied that the insurance placement correspondence was “likely to be relevant and important for the fair resolution of the claim”. The Judge acknowledged that if he had come to a different conclusion on relevance, he would have been satisfied that disclosure of the placement correspondence was reasonable and proportionate.
AmTrust appealed the decision.
COURT OF APPEAL DECISION
The Court of Appeal allowed the appeal and ordered disclosure of the insurance placement correspondence. The Court noted that when considering an order for Extended Disclosure, the starting point is PD57AD itself. This states that issues for disclosure are "the key issues in dispute which will need to be determined with some reference to contemporaneous documents for there to be a fair resolution of the proceedings".
Pursuant to paragraph 6.4 of PD57AD, any order for Extended Disclosure "must be reasonable and proportionate, having regard to the overriding objective" and the various factors listed at paragraph 6.4. There is no threshold or prior test of relevance. The Court of Appeal explained that "the issue is multi-factorial" and in this case too much emphasis had been placed upon an assumption that there is a minimum threshold of likelihood of the documents being relevant, when the degree of likelihood is just one factor to be taken into account. Other factors to consider include the nature of and complexity of the issues, the importance of the case, the number of documents involved, the ease and expense of searching documents, the financial position of each party and the need to ensure the case is dealt with expeditiously, fairly and at a proportionate cost.
The Court referred to the discussion of issues for disclosure by Sir Geoffrey Vos C, as he then was, in McParland & Partners Ltd v Whitehead [2020] EWHC 298 (Ch) in which the Chancellor emphasised the importance of the distinction between issues for trial and issues for disclosure, noting that many issues for trial (such as issues of law) do not require disclosure. However, the Court of Appeal explained that this "should not be translated or elevated into the proposition that it is for the judge when determining whether to order extended disclosure to decide definitively whether documents will be relevant to the manner in which an issue for trial is ultimately determined by the trial judge".
The Court of Appeal concluded that that was what the Judge had done here. In concluding that he could not see how the meaning of the contested policy clauses could be affected by the materials of which Extended Disclosure had been sought, the Judge had effectively decided that the documentation should be excluded and could have no effect on the task of construction, thereby restricting the scope of argument available to AmTrust at the preliminary issues trial. The question of whether the placement correspondence can be relevant to construction was a question for the trial judge to decide. In approaching the issue before him, the Judge had failed to consider the factors set out in PD57AD that are relevant when considering whether Extended Disclosure is necessary: for example, whether the documents may be regarded as having a probative value in supporting AmTrust's claim on construction.
The Court of Appeal concluded that while it was possible that the further documentation might not affect the proper construction of the clauses, the question of construction could not be pre-determined without having sight of the documentation itself.
The Court of Appeal also rejected the Insurer's argument that given the insuring clause was a market standard wording, written to accord with the SRA minimum terms, its construction could not be affected by pre-contractual communications. Even if the insuring clause and the exclusion clauses are in standard form and modelled on the SRA minimum terms, "that cannot be determinative of the proper construction of the Policies". The trial judge will need to consider, they held, whether in the circumstances of the case, the policy covers the activities which have led to the claim. Similarly, the Court of Appeal declined to determine at the disclosure stage the applicability of the various authorities in which the courts have had to construe and apply the various clauses from the SRA minimum terms on which the parties rely: those will be matters for trial.
It was also relevant that AmTrust was standing in the shoes of the Scheme Solicitors, as statutory assignees under the 2010 Act. As a result, AmTrust did not have access to the documents sought, resulting in an imbalance between the parties in circumstances where the Insurer did have such access. Although the documents may not advance the matter, fairness required that AmTrust have the opportunity to consider them.
It is unusual for the Court of Appeal to intervene in such a case management decision. Here, they did so essentially because they took the view that in making his decisions about disclosure, the Judge at first instance had usurped the role of the trial judge, effectively closing down a line of argument which was alive on the face of the statements of case and ought properly to be the subject of disclosure.
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