Impact Funding Solutions Ltd v AIG Europe Insurance Ltd

In the case of Impact Funding Solutions Ltd v AIG Europe Insurance Ltd, the Supreme Court of the United Kingdom determined the extent of professional indemnity insurance coverage for solicitors in England and Wales. The primary dispute involved the interpretation of an insurance policy exclusion clause and its application to a disbursements funding master agreement (DFMA) between Impact Funding Solutions Ltd and Barrington Support Services Ltd. Barrington, a law firm, failed to properly investigate and prosecute claims for its clients, resulting in financial losses for Impact, which had provided funding for the litigation disbursements. Impact sought to recover its losses from Barrington's professional indemnity insurers, AIG Europe Insurance Ltd, under the Third Parties (Rights against Insurers) Act 1930.

The Supreme Court, in a unanimous judgment, held that the exclusion clause in the insurance policy applied to defeat Impact's claim against AIG. The court found that the DFMA constituted a contract for the supply of services to Barrington, which fell within the exclusion clause's scope. The exclusion clause excluded cover for any claim or loss arising out of a breach by the insured of terms of any contract or arrangement for the supply to, or use by, the insured of goods or services in the course of providing legal services. The court concluded that the DFMA was a contract for the provision of services to Barrington, as Impact had contracted to supply those services to Barrington in the course of Barrington's provision of legal services. The court rejected the argument that the exclusion clause should be construed narrowly or that a term should be implied to restrict its scope. The exclusion clause was consistent with the purpose of the policy, which was to protect the public who use the services of solicitors.

In a dissenting judgment, Lord Carnwath argued that the exclusion clause should be interpreted narrowly and that the DFMA did not fall within the scope of the exclusion. However, the majority of the court disagreed, finding that the exclusion clause applied to defeat Impact's claim against AIG. The Supreme Court's decision clarified the scope of professional indemnity insurance coverage for solicitors in England and Wales and the interpretation of exclusion clauses in insurance policies.