Insurance firms relieved of Lynn claim payments

TWO INSURANCE companies have secured court orders which mean they will not have to pay out multimillion-euro claims on foot of many insurance policies taken out by missing solicitor Michael Lynn and his property company, because of alleged fraudulent misrepresentation and non-disclosure of material facts.

More than 250 claims against the policies have been made to date by banks and others owed vast sums by Mr Lynn, who has estimated liabilities of some €80 million.

In making the orders yesterday against Mr Lynn and his company, Mr Justice Peter Kelly noted the court has yet to determine whether Fiona McAleenan, a solicitor in Mr Lynn’s firm, is entitled to insurance cover relating to any undertakings she signed while working in the practice.

In claiming they were entitled to refuse to pay out on foot of the policies, both companies argued the vast majority of claims related to alleged breach of residential mortgage solicitors’ undertakings.

They claimed their investigations suggested a practice in Mr Lynn’s firm from at least 2003 of providing multiple undertakings relating to the same property but this practice was not disclosed to them. Chubb Insurance Company of Europ SA and WR Berkeley Insurance Europe Ltd had taken the Commercial Court proceedings against Michael Lynn and Fiona McAleenan, whom the companies described as practising as Michael Lynn Company, and Overseas Legal and Tax Services Ltd, trading as Overseas Property Law.

The companies claimed the defendants must have been aware they would not be able to comply with undertakings given on foot of the policies. They alleged they were entitled to have declared void two particular policies taken out with them for alleged non-disclosure of material fact by the defendants and also said the policies should be declared void for fraudulent misrepresentation on the proposal form.

Yesterday, Paul Sreenan SC, for the companies, applied for orders against Mr Lynn and Overseas declaring the policies void on grounds of failure by Mr Lynn and Overseas to enter any defence in the case. The proceedings against Ms McAleenan, of Betaghstown, Co Meath, will be heard at a later stage.

Mr Sreenan stressed his application was without prejudice to the claims made by Ms McAleenan.

He said Ms McAleenan was defending the case on the basis she was not a partner in the firm and the insurance policy was a composite policy, not a joint policy.

In making the orders against Mr Lynn and Overseas, Mr Justice Kelly said the companies were entitled to have the policies declared void ab initio(from the beginning) because of non-disclosure of material facts and fraudulent misrepresentation on the part of Mr Lynn and Overseas.

The proceedings arose after the two companies agreed to provide cover for Michael Lynn Company, the practice set up by Mr Lynn, and Overseas Property Law, which provided legal services for persons investing in overseas property. The cover sought was professional indemnity cover in excess of the €2.5 million primary cover to be provided by AIG Insurance Company Ltd.

Chubb claimed, relying on representations of the defendants, it agreed to provide €4.5 million cover for each claim in excess of €2.5 million for the period from January 1st, 2007, to January 1st, 2008.

WR Berkeley claimed it agreed, also in reliance on representations of the defendants, to provide (over the period May 18th, 2007, to December 31st, 2007) €4 million cover for claims in excess of a €7 million cover already in place.