The High Court ruled that Liberty Insurance Limited must pay the plaintiffs’ costs from 1 January 2012 after finding that it should reasonably have repudiated its insurance contract with defendant Martin J. Kearns earlier. The ruling concerned two property investment cases and applications by LK Shields to come off record as solicitors for Kearns.
The judgment, delivered by Ms Justice Murphy on 25 January 2016, addressed proceedings brought by Michael and Audrey Mooney and by John Bermingham. The plaintiffs were among investors who brought separate actions concerning property in Adeje, Tenerife. They alleged, among other things, professional negligence and misconduct by Kearns over documents he notarised for their investments. Those claims were not decided in this judgment.
Kearns, a solicitor and notary public based in County Galway, had professional indemnity cover first placed with Quinn Insurance for December 2009 to November 2010. Liberty later acquired Quinn’s assets and liabilities, including the policy. In March 2012, LK Shields told the plaintiffs’ solicitor that, on senior counsel’s advice, Liberty considered Kearns covered, subject to a separate €20,000 excess for each of 89 claims, and that he would defend the actions.
In March 2015, as the plaintiffs sought a trial date, Liberty refused indemnity and withdrew its instructions to LK Shields. The insurer’s stated reason was that Kearns had previously notified another insurer of claims and circumstances relevant to the proceedings. The court said it had not been told how that information came to light or why it had not been found during the earlier investigation. It considered it inconceivable that reasonable and diligent inquiries in 2010 and 2011 would not have revealed it.
The judge found that the delay, together with Liberty’s earlier insistence that the plaintiffs prove their claims, had a direct part in the plaintiffs bona fide incurring costs. The court rejected the suggestion that those costs would necessarily have been incurred in the same way without insurance: there was no evidence Kearns would have defended the claims as vigorously, and he had not taken steps to appoint a new solicitor or indicated that he intended to defend them.
The court held that solicitors could not be compelled to continue acting, but that conditions could be attached to permission to come off record. It allowed LK Shields to come off record and ruled Liberty liable for the plaintiffs’ costs from 1 January 2012, a date the court considered reasonable for a proposed refusal of cover. It said that if Liberty did not undertake to pay those costs, it would take steps to join the insurer to the proceedings to give effect to the order. The judgment did not determine the underlying investment claims.