Court Considers Reimbursement Of Defence Costs Under ICAEW Minimum Terms

In Oldham v QBE Insurance (Europe) Limited [2017] EWHC 3045 (Comm) the court was asked to consider challenges to an arbitration award. In a welcome clarification on the interpretation of clause C10.2 of the Institute of Chartered Accountants of England and Wales ("ICAEW") minimum terms (the "Minimum Terms"), the court held that the arbitrator had not erred on the law and the insurer was entitled to reimbursement of defence costs that it had advanced to the insured pending resolution of the coverage dispute between them.

Mr Oldham is an accountant and licensed insolvency practitioner who was subject to a claim for misappropriating company money in his role as a joint administrator of MK Airlines (currently under appeal). Mr Oldham sought an indemnity and defence costs under the Policy. The insurer disputed cover on the basis that the claim was made against Mr Oldham prior to inception of the Policy and referred the matter to arbitration, as required by the Minimum Terms. The insurer nonetheless advanced defence costs in the underlying claim pursuant to its obligations under clause C10.2 of the Minimum Terms which provides:

"In the event of any dispute concerning liability to indemnify the Insured...the Insured and the Insurers agree that Insurers will advance Defence Costs and indemnify the Insured in accordance with clauses A1-A3 [the insuring clauses] and clause C5 [the Advancement of Defence Costs clause] pending resolution of any such dispute."

The arbitrator, on the basis of written submissions only, held in Part I of his award that there was no cover under the Policy and ordered Mr Oldham to pay the arbitration costs. The insurer then served submissions on costs and Mr Oldham was given a number of extensions to respond. However, before expiry of the latest extension, the arbitrator issued Part II of his award, finding that the insurer was entitled to reimbursement of the defence costs and ordered Mr Oldham to make a payment on account of costs within 28 days of the award.

Mr Oldham challenged the insurer's entitlement to reimbursement of defence costs under section 69 of the Arbitration Act 1996 (the "Act") on the grounds that as a matter of law the insurer had no such entitlement under the terms of the Policy. He further challenged the orders for costs and a payment on account under section 68 of the Act on the grounds that he was not given a reasonable opportunity to address arguments as to why these orders should not have been made...