Solicitors’ fraud is a hot topic for insurers. Barney Micklem and Simran Khanna explain why
It is common practice for solicitors found guilty of fraud to be denied professional indemnity insurance cover. However, the decision in Zurich Professional Limited v Karim and others [2006] EWHC 3355 (QB), [2006] All ER (D) 238 (Dec) was unusual as it denied cover to partners who had condoned an employee’s dishonesty.
The facts
On 15 December 2006, Irwin J ruled that the Law Society’s Assigned Risks Pool (ARP), was not liable to indemnify its insured, the defendants. The partners of Karim Solicitors, Imran and Saira Karim, were the second and third defendants; the first defendant was their mother, Mrs Karim, an employee of the firm.
Claims were made against Karim Solicitors by former clients for the return of misappropriated money; the ARP sought a declaration that it was not obliged to indemnify Karim Solicitors on the basis that these claims arose out of dishonesty and/or fraud committed or condoned by all three of the Karims.
That assertion was made on the following three bases:
- Each of the
