Payment made to a company under professional indemnity policy belongs to the company

A payment made under a professional indemnity policy to a company which later went into creditors’ voluntary liquidation belonged to the company, not the parties who had brought a claim against the company.

A company that later entered creditors’ voluntary liquidation had claimed £250,000 from its professional indemnity insurer (the limit under the policy) in respect of a professional negligence claim against the company for £700,000.

The only realisable asset of the company was its bank balance of £246,000 which was the balance of the insurance payout. The largest creditor of the company was its director who was claiming £250,000. The liquidators sought the court’s directions as to what should be done with the funds in the bank account. At that stage, the professional negligence claim was stayed. 

The claimants in the professional negligence claim alleged that they had a proprietary interest in the bank balance for various reasons. This included that they were the beneficiaries of the insurance policy in equity or that the insurance payment was held on trust for them on the basis it would be unconscionable for the company to retain the money, or on the basis of preventing unjust enrichment.

The court held that there was no liability of the company towards the claimants as the proceedings were stayed and no liability had yet been established and may never be. The court also held that there was no justification for the imposition of a trust on the facts of this case: it was not unconscionable for the company to retain the insurance payout nor did the evidence show the company had been unjustly enriched.

Overall, the court held that the insurance payment belonged to the company. 

Re: Wood v Desi [2024] EWHC 1893 (Ch)