The structure of global services groups and alliances has become an increasingly hot topic, particularly in the light of a number of recent corporate scandals and collapses, and the litigation which has resulted.
A recent decision of the commercial court looked at a professional indemnity insurance policy of Grant Thornton International (GTI) and a number of member firms of that corporation in Brit Syndicates v Ital Audit and Grant Thornton International.
The court considered whether GTI was entitled to an indemnity under a professional indemnity insurance policy notwithstanding a non-disclosure by a former member of the group, Ital Audit, formerly Grant Thornton, Italy (GT Italy).
The proceedings followed the notification by GTI of the claims brought in New York against both GTI and GT Italy in respect of, among other things, an audit of Parmalat Finanziara.
The professional indemnity policy listed 93 member firms as "assured firms" but alsohad an extension which included GTI , if the claims against GTI were "arising from claims made against a member firm of [GTI ] insured by the terms and conditions of this policy"
Brit brought declaratory proceedings against both GTI and GT Italy seeking a declaration that GT Italy had made a non-disclosure, which allowed insurers to avoid the policy in respect of GT Italy.
In respect of GTI , Brit argued that since the insurance cover for GTI was only available if the claim arose from a claim against an insured firm, then on the basis of the avoidance of cover in respect of GT Italy, GTI was not entitled to an indemnity.
The judge found that construction could not be limited to the meaning of the words "insured by the terms of the policy" but needed to reflect the "substance of the provision".
Provided the claim did arise from a claim against one of the other named firms and otherwise met the terms and conditions of the policy, GTI was a separate insured.
As a result, if they were unaware of a non-disclosure by GT Italy, then they were still entitled to an indemnity.
This decision is very much based on the construction of this particular policy wording. The recognition that an "umbrella corporation" can be a separate insured and not bound by a non-disclosure of a national member will be welcomed by global professional services groups and alliances and their brokers.
' Report by Matthew Hirst, a partner in the insurance group of DLA Piper Rudnick Gray Cary UK