FI: UK decision provides guidance for FIs with Mitigation Costs clauses

Standard Life Assurance Ltd v Ace European Group [2012] EWHC 104 (Comm)

Decision

Standard Life operated a Life Pension Sterling Fund, which included a substantial proportion of asset backed securities. From 2007, asset backed securities became increasingly illiquid and, with effect from 14 January 2009, Standard Life took the decision to switch to a different source of prices. This led to a one-day fall of 4.8 per cent in value of units in the fund. Following complaints by customers, Standard Life concluded that some 64 per cent (by value) of customers (worth £124 million) would have mis-selling claims. Standard Life decided that it would restore the 4.8 per cent fall and then invite claims, and it paid those sums into the fund.

Standard Life sought to recover the payments from its liability insurers. The policy was for £100 million and covered Mitigation Costs defined as "any payment of loss, costs or expenses reasonably and necessarily incurred by...