A key insurance provider to the legal industry pulled its professional indemnity cover for two major law firms after they started working on litigation against the insurance industry during the COVID lockdown, it has emerged.
Insurer QBE decided not to renew cover for U.K. law firms Fieldfisher and Mishcon de Reya after the firms attempted to build group claims to push for business interruption insurance payouts in the early stages of the pandemic in 2020, according to several people with knowledge of the matter. Normally, firms stay with an insurer for a number of years with policies renewing automatically at the end of the policy term.
The controversial move meant both firms had to find new insurance providers, causing them problems given they then had to disclose to new providers that they had previously been rejected for cover.
QBE, Fieldfisher and Mishcon declined to comment.
Many U.K. companies made insurance claims under business interruption policies as they were affected by the pandemic. Several insurers responded that their policies were not intended to cover such unprecedented lockdown situations. A number of cases continue.
It is unclear if the claims would have involved the firms litigating directly against QBE.
Either way, some believe QBE’s move holds implications for access to justice as it could mean insurance providers try to avoid lawsuits by threatening to pull professional indemnity cover for law firms that act for claimants.
One person in the insurance industry said he had never heard of such a situation before.
One rival law firm leader said: “This sounds like a very extreme way to behave. There are always going to be matters against insurers. If you take that line that you are not going to insure firms that act against insurance providers that’s pretty horrific. Firms cannot trade without cover.”
Another rival law firm managing partner said QBE’s decision sent “shockwaves” across the legal industry and called the situation “an example of insurance overreach”. They said: “It wouldn’t surprise me if the [legal] industry started to look at setting up captive insurers or a mutualisation.”
Professional indemnity insurance providers are said to be huge drivers of behavior in the legal industry. When Russia invaded Ukraine, several partners said insurers put exclusion clauses into indemnity policies for law firms, or pulled cover for Russia-related work altogether, which some say influenced firms’ decisions to leave Russia.
The managing partner added: “This is a slippery slope. Once they have withdrawn cover for one thing, can they withdraw cover for others as well? For example, with ESG, could they pull cover for representing the fossil fuel industry?”