The Risks of Failing to Detect Fraud 

Those who place and underwrite insurance on behalf of accountants will be interested in the impact of a judgment handed down by the House of Lords on 30 July 2009 in Moore Stephens (a firm) -v- Stone & Rolls Limited (in liquidation) [2009] UK HL 39 which considered whether a firm of auditors could be held liable for failing to detect a fraud committed by one of its clients. The judgment in the case has been eagerly awaited and received much media attention. This claim was described as being "...a rare and extreme case...".

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Summer 2009

Key issues covered in this edition include:

• Lords overule the Court of Appeal in Wasa v Lexington;
• Court joins insurers to proceddings against broker;
• Master policy did not 'drop down' in respect of claim for legal costs;
• Equity Bill - age and insurance.

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House of Lords, 30 July 2009

• The House of Lords finds for reinsurers, in a ruling of strict orthodoxy and traditional insistence on the primacy of the contract terms;
• An English law facultative reinsurance contract is not to be read so as to cover damage arising outside the period of cover, even if the primary policy, governed by Pennsylvania law, is adjudged by a US court to grant such coverage;
• Reinsurers have no obligation to follow a settlement - or a judgment - that would not be covered by the reinsurance policy as a matter of law.

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The latest Regulatory Alert from Moore Stephens, designed to keep you up-to-date with the latest requlatory developments in the insurance industry.

Contents

• Changes to Financial Services Compensation Scheme (FSCS);
• Director banned for inadequate control and business wound up;
• HSBC fined over £3m for information security failings;
• New rules for Approved Person;
• CEIOPS releases its second set of advice on Solvency II Level 2: implementing measures.

InSure August 2009

This month's roundup of developments affecting the insurance industry sees the FSA changing rules for approved persons and publishing "real life" cases, Sir Walker publishing his review on corporate governance, HM Treasury publishing its visions for the insurance industry, ....

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Reinsurers breathe a sigh of relief as the House of Lords ends a year of uncertainty for the interpretation of "back-to-back" contracts - but have the Law Lords simply stored up more trouble for the future? 

On the day that the House of Lords brought down the curtain on centuries of judicial law-making, the Law Lords also emphatically overturned the decision of the Court of Appeal in the case of Wasa & AGF -v- Lexington and ended another long-running legal saga - with significant implications for the London reinsurance market.

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