The Commercial Court has handed down judgment in Liberty Managing Agency Ltd & Ors v Chedid & Anor [2026] EWHC 2354 (Comm), following an expedited trial before Jacobs J on 9 September 2026.
The Defendants, former officers of Petrofac, face criminal charges relating to alleged bribery offences, to which they have pleaded not guilty. Their defence costs have to date been paid under a £15m primary D&O policy and a £15m first excess policy, which neared exhaustion. The Claimants underwrote a second excess policy providing £45m excess of £30m.
On 10 August 2026, the Claimants purported to avoid the Defendants’ interests in the second excess policy for alleged fraudulent misrepresentation and/or non-disclosure at placement. Those allegations are disputed and unproven.
Central to the dispute was clause 8.2 (Non-Avoidance) of the primary policy, which was incorporated into the second excess policy. Clause 8.2 provided materially that the insurer “shall not avoid this policy […] except with respect to” placement fraud by an insured “where such fraudulent conduct is established by a final decision of a court, tribunal or regulator or by a formal written admission”.
The Court considered: whether the Claimants could avoid the policy before the alleged placement fraud had been established; whether public policy prevented clause 8.2 from restricting avoidance; and whether the defence costs were independently uninsurable because they arose from alleged bribery.
The Court held that the “clear and only realistic meaning” of clause 8.2 was that the specified decision or admission had to occur before any right to avoid could arise; “establishment” was the relevant point in time. That construction was reinforced by other policy provisions including an exclusion at clause 5.1 (Conduct) which contained the same “is established” language; it would be “impossible to contend” that this did not preclude the insurer from invoking the exclusion before establishment. The policy therefore remained binding unless and until the insurer’s alleged right to avoid was objectively established – an “important and sensible commercial result”.
The Court also rejected the Claimants’ submissions on public policy. It was common ground that the law will not enforce a term which purports to protect an insured from the consequences of its own fraud. However, clause 8.2 provided no such immunity; its function and effect was to allocate the commercial risk during the period between allegation and proof. The Claimants remained entitled to bring proceedings to establish fraud and, if successful, avoid the policy from inception and seek recoupment. The Court drew an analogy with contractual ‘pay now, sue later’ provisions, which require performance pending determination of disputed fraud allegations.
On the insurability of defence costs, the Court found the answer “straightforward”: applying Coulson v News Group Newspapers Ltd [2012] EWCA Civ 1547, it held that there is no public policy which prohibits an agreement to fund the costs of defending against unproven criminal allegations.
The Claimants were therefore not presently entitled to avoid the policy as against the Defendants, and were ordered to advance defence costs.
The Court had indicated that given the importance of the issues, the losing party was likely to be granted permission to appeal if sought. Permission was duly granted to the Claimants at the consequentials hearing, which Jacobs J concluded by commenting: “The arguments I heard were of the very highest quality and particularly interesting. I look forward to seeing what the Court of Appeal says.”
Anneliese Day KC and Maurice Holmes represented the First Defendant, instructed by Joanna Grant and Anthony McGeough of SDV Fenchurch.
The judgment is available here.
