Impact Funding Solutions Ltd v Barrington Support Services Ltd
[2016] UKSC 57
Independent editorial summary — not the official judgment. Read the full judgment via the source link.
Ratio Decidendi
An exclusion in an insurance policy forms part of the definition of the scope of cover and is not to be approached with any predisposition to construe it narrowly; the contra proferentem doctrine has a role only where genuine ambiguity remains after the ordinary process of construction. The disbursements funding agreement was a contract for the supply of services to the solicitors in the course of their provision of legal services, so the standard exclusion in the solicitors' professional indemnity policy for liability arising from breach of such a contract applied and the insurer was not liable to the funder.
Facts
Barrington, a firm of solicitors conducting industrial deafness claims, entered a disbursements funding master agreement (DFMA) with Impact, under which Impact made loans to Barrington's clients to fund disbursements and Barrington warranted that it would perform its professional duties towards those clients. Barrington failed adequately to investigate the merits of the claims and misapplied funds, the clients could not repay their loans, and Impact recovered damages of £581,353.80 from Barrington for breach of the DFMA. Barrington being insolvent, Impact claimed against its professional indemnity insurer, AIG, under the Third Parties (Rights against Insurers) Act 1930; AIG relied on the policy exclusion for loss arising from 'breach by any Insured of terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of providing Legal Services'. Judge Waksman QC held the claim excluded, but the Court of Appeal allowed Impact's appeal.
Judgment Summary
The Supreme Court allowed AIG's appeal by four to one (Lord Carnwath dissenting), restoring the conclusion that Impact's claim fell within the exclusion. Lord Hodge held that there was no ambiguity giving contra proferentem any role, and that the DFMA was a contract for the supply of services to Barrington: Barrington contracted as principal, obtained a real commercial benefit from the funding of its disbursements, and paid for the facility, so Impact's claim arose from breach of a contract for the supply of services to the insured and was excluded. Lord Toulson added that words of exception may simply be a way of delineating the scope of the primary obligation and are not automatically to be given a narrow construction.
Key Quotes
"The fact that a provision in a contract is expressed as an exception does not necessarily mean that it should be approached with a pre-disposition to construe it narrowly."
— Lord Toulson at [35](verbatim, verified against the judgment)
"An exclusion clause must be read in the context of the contract of insurance as a whole. It must be construed in a manner which is consistent with and not repugnant to the purpose of the insurance contract."
— Lord Hodge at [7](verbatim, verified against the judgment)
Subsequent Treatment
In Burnett or Grant v International Insurance Co of Hanover Ltd [2021] UKSC 12 the Supreme Court cited Impact Funding (per Lord Hodge at paras 6-7) for the principle that contra proferentem is relevant only in a case of genuine ambiguity or real doubt as to the meaning of the words used in an insurance exclusion.
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