Professional firms and company directors can no longer rely on independent settlement to resolve claims against them, Reynolds Porter Chamberlain (RPC) has warned.

A recent House of Lords decision could result in more cases going to court, rather than reaching early settlement.

RPC partner Jonathan Davies said the Lords ruling meant directors or professional firms that settled fraud and negligence claims against them by one party, could still be sued by co-defendants.

Davies was speaking at RPC's annual professional liability seminar last week.

In Cape & Dalgleish v Fitzgerald, IM Properties sued Fitzgerald, an IM director, for £700,000 for breach of contract and fiduciary duty.

Fitzgerald reached an out-of-court settlement with IM, in which he paid £430,000 to settle all claims against him.

IM then sued its auditor Cape & Dalgleish for the remaining £270,000.

The Lords decision allowed Cape & Dalgleish to launch proceedings against Fitzgerald to contribute to the £270,000, despite his out-of-court settlement with IM.

Davies said the judgment would make early settlements more difficult.

"There are many directors, auditors, lawyers, engineers and architects who reach out-of-court settlements, not because they're guilty, but because they feel that they have a weak case, or they can't risk everything on the vagaries of the justice system," he said.

"Unless they can reach a multilateral settlement with everyone who could be involved in the litigation, professionals, directors and their insurers could be left in legal limbo.

"It means that if you're insuring directors or their professional advisers, you're going to have to be much more careful before signing an out-of-court settlement."