Solicitors PI: Insurers' Fraud Exclusion Upheld

The recent decision in Goldsmith Williams (a firm) v Travelers Insurance Company Ltd (following that in Zurich v Karim [2006]) is further authority for the proposition that a solicitor insured can condone a dishonest course of conduct by a co-director (or partner) without being involved in, or specifically aware of, the fraudulent acts or omissions giving rise to the claim(s) in question.

Insurers were, therefore, able to successfully defend a claim brought under the Third Parties (Rights Against Insurers) Act 1930 in respect of thefts by an insured arising out of fraudulent mortgage transactions.

Key points arising from the Goldsmith decision

In the context of the policy, the word "condone" was intended to convey a state of affairs where the non-dishonest director or partner knows of the dishonesty of his co-director or co-partner yet overlooks it and allows the business relationship to continue.