Godiva, the intermediary arm of Coventry Building Society, is pursuing professional indemnity insurance firm Travelers for losses arising fromalleged mortgage fraud.
Godiva is just one of a number of lenders making claims totalling over £50m. Godiva’s claim is believed to be less than £500,000, although it isone of the first lenders to take its case to court.
The case arose out of the activities of a conveyancing partner at Willmett Solicitors. Before his resignation the partner had been for some yearsinvolved in a number of allegedly fraudulent property transactions, unbeknown to the other partners.
When losses came to light as a result of the financial crisis numerous claims were brought against Willmett and its partners by various lenders,including Godiva.
Willmett has subsequently gone into liquidation and has no funds to meet the claims. Its insurer, Travelers, asserts that all activities arisingfrom the partner’s involvement in alleged frauds can be aggregated as one claim, which it has capped at £2m.
Having been granted ’leave to intervene’, the Law Society and the SRA will provide assistance to the court and help it to better understand thecase.
The Law Society has been granted the intervention because it says that upholding the insurer¹s interpretation of the aggregation clause couldraise major concerns for the profession and would not be in the public interest.
The SRA is also intervening on behalf of the Compensation Fund, discretionary fund of last resort for anyone affected by a solicitor’s dishonesty.
If insurers do not pay, a client can apply to the fund for a recompense grant.
Desmond Hudson, chief executive of The Law Society, says: “It was vital that we, as well as the SRA, were able to intervene in this case.
“The insurer¹s interpretation of the aggregation clause, which led it to cap its insurance indemnity, could have widespread significance for thepublic as it will affect many claimants¹ right to redress.”
Travelers says it cannot comment as the legal case is ongoing.