The Financial Services Compensation Scheme (FSCS) is facing a potential £60m bill to cover the legal expenses of corporate policyholders of insolvent insurers following a Court of Appeal decision on the collapse of Independent Insurance, revealed a report.
It said the potential pay-out followed the Court of Appeal's decision to uphold a previous ruling won by city law firm Davies Arnold Cooper (DAC) on behalf of Independent Insurance policyholder GeoLogistics.
DAC successfully argued that the FSCS's refusal to pay pre-liquidation legal costs was illegal and the FSCS was responsible for providing a corporate policyholder's legal fees and disbursements as a result of the insurer's insolvency, said the report.
Independent Insurance's estate is likely to benefit by up to £15m following the decision. In addition, DAC said £2m would be earmarked for the benefit of hundreds of policyholders.
