… The Judge considered whether it could argued that in all of the circumstances there was an implied contract between the members of the LLP and the insurers …
In Zeckler v Assigned Risk Pool Manager Capita Commercial Services Ltd (reported on Westlaw) the High Court has allowed an appeal by a solicitor from an order of the Chief Bankruptcy Registrar who had refused to set aside a statutory demand against the solicitor seeking payment of a substantial Assigned Risks Pool (ARP) premium payable by the limited liability partnership (LLP) of which the solicitor was a member.
The solicitor’s argument was that he was not personally liable for the run-off premium, because the contract of insurance was with the LLP, and he had not personally guaranteed the liability.
This is an issue that came up in Jones v St Paul International Insurance Company Ltd – see this Law Society Gazette article.
In Zeckler, the insurer relied on the Solicitors’ Indemnity Rules, which are applicable to solicitor LLPs and their members, which state that, “By applying to enter the Assigned Risks Pool, the Firm and any person who is a Principal of that Firm … shall be jointly and severally liable to … pay the ARP Premium.”
The Judge considered whether it could argued that in all of the circumstances there was an implied contract between the members of the LLP and the insurers, but concluded that, while that contention was arguable, insufficient evidence had been provided to enable him to decide the point. Accordingly there was a genuine dispute as to whether the solicitor was personally liable, which the court could not resolve, so the statutory demand was set aside.
In light of this decision insurers are likely in future to seek recovery of ARP premiums from LLP members via normal debt collection proceedings, rather than in the first instance via bankruptcy. They would still have to establish in any such case that there is a contract between themselves and the LLP members.