Risk Update

Conflicts Allegations — Financial Matters

‘Clash of interests’ at Herbert Smith Freehills over FCA review of business interruption insurance” —

  • “One of the City’s most prominent law firms has been accused of being compromised by representing the financial watchdog in a test case over business interruption insurance. Herbert Smith Freehills is advising the Financial Conduct Authority after the watchdog said that it would seek a High Court review of policies after a large number of claims were rejected during the Covid-19 lockdown.”

Additional Detail: “Role of Herbert Smith Freehills questioned in FCA review of rejected Covid-19 business interruption claims” —

  • “Mactavish, the specialist outsourced insurance buyer and claims resolution expert, has reviewed the list of insurance policies that the FCA has published as being subject to review by the Court in the Covid-19 related legal review of failed business interruption claims.”
  • “Mactavish is calling on Herbert Smith Freehills, which is representing the FCA in this case, to disclose if it also represents any of the insurers or brokers whose wordings will be subject to scrutiny since Mactavish believes that if that is the case it is difficult to see how conflicts of interest would not arise. Mactavish believes that there is a public interest in this disclosure because the FCA, which will presumably be paying their fees, is funded by the taxpayer and was set up to be an independent body to protect the interests of consumers.”
  • “Mactavish has also discovered that several of the policy wordings in the policies being considered for the FCA’s legal case were drafted by brokers, not by insurers. Given this, it is calling on the regulator to run a more in-depth review of the role played by brokers around the failed Covid-19 business interruption claims. It says the Covid-19 crisis has revealed several conflicts facing brokers that it believes are detrimental to their clients.”

Ex-Client Lodges $1.3M Fraud Suit Against Foley & Lardner, 2 Houston Lawyers” —

  • “A Houston company is seeking $1.3 million from Foley & Lardner and two of its lawyers, alleging they ‘perpetrated an outright fraud’ to induce it to invest and loan money to another firm client.”
  • “The plaintiff, Schumann/Steier Holdings, accuses Foley and the attorneys of ‘numerous misrepresentations and omissions as well as breaches of fiduciary duty.’ In addition to the law firm, the suit names special counsel Anacarolina Estaba, partner Peter McLauchlan and McLauchlan Family Properties. Bedfeld and McLauchlan split their practices between Houston and New York.”
  • “‘The obvious conflict of interest created where plaintiff’s investment was ultimately going directly to his own law firm to pay for another client’s legal bills was a clear breach of fiduciary duty and not appropriately disclosed,’ the petition alleges.”
  • “A spokeswoman for Foley wrote in an email that the firm declines comment on the allegations in Schumann/Steier Holdings v. Foley & Lardner.”