The High Court dismissed solicitor Fiona McAleenan’s claim for cover under a professional indemnity policy, finding that her proposal form materially misrepresented her status in the practice and that the insurer had proved the statement was made recklessly.
In a judgment delivered on 6 May 2010, Ms Justice Finlay Geoghegan found that McAleenan was an employee of Michael Lynn, practising as Michael Lynn & Co., and that no partnership between them had come into existence. The court also found that the policy was a composite policy, providing separate cover to insured parties, including an employed solicitor.
AIG (Europe) Limited had purported to avoid the policy in December 2007, citing alleged material non-disclosures. It later added a ground that McAleenan had misrepresented herself as a partner when completing the proposal form. The court ruled that AIG could rely on that additional ground.
The judge found that the proposal form, which McAleenan signed on 12 April 2007, represented her as a partner in the practice. That representation was untrue and material, the court held, because an insurer could reasonably regard the difference between a sole-principal practice and a partnership as relevant to supervision and risk controls.
McAleenan said the form had already been completed when it was presented to her and that she did not notice the answers about her status. The judge accepted that she did not knowingly make the false statement and had no intent to deceive. However, the judge concluded that signing without reading those answers meant she had made the statement recklessly, in the sense of being careless as to whether it was true. Under the policy’s terms, AIG could avoid cover if it proved a material misstatement was not innocent and free of fraudulent intent. The court found that burden had been met.
The judge separately concluded that AIG could not avoid McAleenan’s cover simply because of alleged dishonest non-disclosure by Lynn. That conclusion did not change the result: the court held that AIG was entitled to avoid the policy against her on the proposal-form ground.
The court did not decide the remaining issues, including whether McAleenan had failed to disclose circumstances that might give rise to a claim or whether she was estopped from claiming as an employee. The order dismissed her claim. The judgment records that AIG’s separate proceedings against her had been stayed pending the outcome of this case; it does not state that those proceedings were determined by this order.