Corporate policyholders may have their legal costs covered by the Financial Services Compensation Scheme (FSCS), after a High Court judgment last week.
Geologistics, a company that held a compulsory insurance policy with Independent, brought the case to the High Court. The issue arose following the failure of Independent Insurance, the commercial insurer that went into liquidation in 2001.
When it collapsed, Independent had 500,000 individual policyholders and also insured about 40,000 businesses.
Last week the judge hearing the case found for Geologistics, meaning the FSCS may have to cover its legal costs. However, the judge also gave the FSCS leave to appeal.
Gerald O'Mahoney, of law firm Davies Arnold Cooper, which represented Geologistics, described the outcome as "a victory first for the many corporate policyholders of the Independent, who were forced as a matter of law to take out compulsory insurance - such as employer's liability - who will now have the pre-liquidation defence costs and expenses paid by the FSCS."
O'Mahoney added: "This should also help the provisional liquidators recoup post-liquidation legal costs of between £5m and £10m, thereby benefiting unsecured creditors of the Independent."
