Court holds insurers are not entitled to a lien for unpaid
premium due from insolvent insured
An insolvent company obtained damages in a professional
negligence claim against its solicitors. That claim had been
pursued with the benefit of various insurance arrangements
(including ATE insurance). The insurers sought recovery of unpaid
premium but the bankruptcy trustee of the company argued that they
were only unsecured creditors in respect of the proceeds.
The company had entered into a "Priorities Agreement"
with (inter alia) the insurers. This had mistakenly provided that
the premium would be recoverable from the solicitors (ie the losing
the defendant) in the event of a judgment against the solicitors.
However, ATE premium is no longer recoverable from the losing
party. Accordingly, the insurers had no contractual (or statutory)
right to a lien over the proceeds.
