In the recent case of Managed Legal Solutions v Mr Darren Hanison (trading as Fortitude Law) and HDI Global Specialty SE [2025] EWHC 2645 (Comm), the High Court considered the circumstances in which an insurer may be joined as a defendant to underlying liability proceedings involving its insured. Sara Palinska and Claudia Seeger from the Policyholder Disputes team review the decision.

The decision in Managed Legal Solutions sheds light on the circumstances in which an insurer may be permitted to enter proceedings in anticipation of a claim being brought against it under the Third Party (Rights Against Insurers) Act 2010 (“TP(RAI)A 2010”). TP(RAI)A 2010 enables a third party who has a claim against an insured person to pursue that claim directly against the insured’s liability insurer where the insured is subject to a relevant insolvency. The judgment also raises potential concerns for insureds who are required to defend liability claims while pursuing corresponding indemnity claims against their insurers.

Background

Mr Darren Hanison (trading as Fortitude Law) (“Fortitude”) conducted a group litigation claim that received funding and security for costs cover from Managed Legal Solutions (“MLS”). The group litigation failed, and as a result, MLS brought a claim against Fortitude relating to the handling of the litigation. Fortitude, in turn, made an insurance claim on its professional indemnity policy underwritten by HDI Global Specialty SE (“HDI”) seeking indemnity in respect of MLS’s claim.

HDI refused Fortitude’s claim, relying on a “trading debts” exclusion within Fortitude’s policy. HDI’s ability to rely on the exclusion required a finding that Fortitude did not owe a tortious duty of care to MLS as its litigation funder. In such circumstances, any sums owed by Fortitude to MLS were likely to be treated as a trading debt and would fall within the exclusion. By contrast, if it were found that Fortitude did owe a tortious duty to MLS, HDI could not rely on the exclusion.

Fortitude initially defended the underlying claim in its entirety, including the allegation that it owed a tortious duty to MLS. However, in November 2024, Fortitude was debarred from defending the claim for failing to comply with an order requiring it to provide an address for service by a specific date. HDI and Fortitude were also separately engaged in arbitration proceedings in relation to the coverage dispute under Fortitude’s policy.

Given that the coverage dispute remained undecided, HDI maintained an interest in the underlying proceedings between MLS, in particular, the issue of whether Fortitude owed MLS a tortious duty of care. Upon learning that Fortitude had been debarred from defending MLS’s claim, HDI issued an application (under Civil Procedure Rule (CPR) 19.2 – see further below) to join the claim between MLS and Fortitude solely on the tortious duty of care issue.

HDI’s central argument in its joinder application was that there was a conflict of interest between itself and Fortitude: while it was in Fortitude’s best interest for the court to find that Fortitude owed a tortious duty to HDI so that Fortitude could recover under its policy, HDI had an interest in demonstrating that no such tortious duty existed and, therefore, no indemnity was available under the policy. HDI argued that it must be joined to the proceedings to protect its interest.

Notably, Fortitude was understood to be on the cusp of insolvency when HDI’s application was issued. While the TP(RAI)A 2010 had not yet been engaged, as Fortitude had not yet entered into an insolvency process, it was anticipated that Fortitude would enter insolvency in short order and that MLS would soon seek to bring its claim directly against HDI instead under the TPR(RAI)A 2010.

Arguments advanced by both parties

MLS opposed HDI’s application on the basis that CPR 19.2 would not apply and that the application should instead be brought under CPR 19.6. CPR 19.2 provides that a new party may be added to ongoing proceedings where the matters in dispute are homogenous with those of the existing party and it would be desirable for the court to resolve the issue in unison. CPR 19.6 is an exception to CPR 19.2 and provides guidance on the addition of a new party after expiry of the relevant limitation period.

MLS argued that HDI could not be added to the claim because the limitation period had expired. It argued that the relevant limitation period was the limitation period for MLS’s claim against Fortitude for its breaches of the tortious duty. HDI contended that the relevant claim for determining the limitation period was the potential claim that MLS would theoretically be able to bring against HDI under TP(RAI)A 2010. This limitation period had not yet started to run and would only do so if it were established that Fortitude owed a liability to MLS. HDI argued in the alternative that the addition of HDI to the proceedings did not involve a new cause of action and, consequently, CPR 19.6 would not apply.

MLS contended that even if a different limitation period applied and CPR 19.2 was accepted as the correct provision, the addition of HDI was not “desirable”, as required under CPR 19.2.

CPR 19.2 v CPR 19.6

The court determined that CPR 19.2 governed HDI’s application. This was on the basis that applying CPR 19.6 by reference to the limitation period for a claim for breaches of tortious duty would fail to reflect the fact that HDI’s interest arose due to its potential exposure to a TP(RAI)A 2010 claim. The relevant claim was therefore determined to be MLS’s prospective claim against HDI under the TP(RAI)A 2010, the limitation period for which had not yet begun, as no liability had yet been established.

In addition, the court noted that in line with the decision in Yorkshire RHA v Fairclough Buildings [1996] 1 WLR 210, the addition of HDI did not give rise to a new cause of action, further supporting the view that the application should be heard under CPR 19.2.

The “desirability threshold”

In deciding whether the application should succeed, the court conducted a balancing exercise between the “desirability threshold” under CPR 19.2 and the question of whether HDI should be placed in a materially stronger position than its own insured. Applying the broad, purposive approach to CPR 19.2 taken in Re Pablo Star [2018] 1 WLR 738, the court concluded that HDI’s ability to protect its interests was a material factor and that it was desirable to permit the joinder application under CPR 19.2, on the following grounds.

Firstly, as Fortitude was debarred, no legal party remained to defend MLS’s liability claim. The court acknowledged that before its debarring, Fortitude had attempted to defend the claim, and in the absence of anyone to respond to MLS, the court would not hear any opposing arguments to MLS’s claim. It was therefore advantageous to allow HDI to defend the claim in Fortitude’s place, as it had a clear material interest in the tortious duty issue. The court further rejected MLS’s objections on the basis of alleged delay by HDI, prejudice and complexity, instead finding that HDI acted promptly once aware of Fortitude’s debarring.

The court relied on Wood v Perfection Travel [1996] IRLR 233 to support its decision. This case established that there is jurisdiction (in appropriate circumstances) to add an insurer to liability proceedings where there is a conflict of interest between the interests of the insurer and the insured. Although MLS further contended that adding HDI to the liability proceedings would place it in a more advantageous position than its insured, the court was not persuaded by this argument. The court acknowledged that HDI had its own interest in the liability proceedings and, had joinder been refused, HDI would be exposed to the risk of providing an indemnity for an otherwise uncontested claim.

Comment

Third Parties (Rights Against Insurers) Act 2010

The decision creates potential tension between the third-party claimant and a defendant’s insurer, as, ordinarily, the TP(RAI)A 2010 only allows a third party to claim directly against an insurer where a formal insolvency process has arisen. The third party does not gain any superior rights “in anticipation of” an insolvency. In contrast to the specific rights provided under TP(RAI)A 2010, the decision provides insurers with a seat at the table prior to a formal insolvency process arising.

Opening the floodgates

MLS contended that the courts are “setting a dangerous precedent” by allowing insurers to join proceedings ahead of any TP(RAI) Act 2010 transfer taking place. This begs the question as to whether policyholders will soon be required to defend a claim on two sides: as against a claimant and as against an insurer looking to be added to claims when they consider a defendant insured is inadequately defending a claim (or defending in a fashion contrary to the insurer’s interest). However, policyholders should be somewhat comforted by the fact that the decision concerns a particular set of circumstances in which the defendant became debarred and the underlying claim would otherwise have been left undefended.

Nonetheless, this judgment undoubtedly gives the insurer a significant advantage in being able to make submissions on an underlying claim. This is unusual, as in normal circumstances an insurer will simply be bound by a judgment in the underlying proceedings. A recent example of this was the decision last year in Makin v Protec [2025] EWHC 895.

Following on from Makin v Protec

The judgment may also represent a changing tide in insurers seeking to proactively defend claims before the liability of their insured is determined. In Makin v Protec [2025] EWHC 895, the defendant went into liquidation the day before the liability trial and was unable to defend its position. A default judgment was entered against the defendant, and its insurers were bound by it.

Fortunately for the insurers, they did not owe any liability to Makin under the terms of the defendant’s policy. However, had coverage been triggered under the policy, the insurers would have been bound by an “empty chair” judgment against the policyholder, which is exactly the circumstance HDI sought to avoid in this case. There are undeniably a multitude of cases in which insurers have been bound by such “empty chair” decisions, and it is no surprise that insurers may be seeking to take more proactive steps to avoid such circumstances in the future.

Appeal to the Court of Appeal

MLS has been granted permission to appeal the decision, citing the lack of authority on both points justifying the grant of leave. Given the above concerns, we wait to see what guidance, if any, the Court of Appeal provides as to when it is appropriate for insurers to be added to underlying liability proceedings in the absence of insolvency, and whether there are any clear lines of demarcation.

Without clear guidance, this could become a fact-dependant “grey area” with the potential for troubling consequences for insureds.

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