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Freakley v Centre Reinsurance International Co [2006] UKHL 45

A claim to reimbursement of expenses incurred by insurers in handling asbestos liability claims against a company after the appointment of administrators did not have statutory priority over other costs of the administration, a floating charge or the unsecured creditors of the company.

27 October 2006

The appellant administrators (S) of a company (T) appealed against the decision ([2005] EWCA Civ 115) that liabilities for claims handling expenses incurred by the insurers (C) acting under the rights conferred by an asbestos liability policy, following the occurrence of an insolvency event, were properly to be treated as liabilities incurred by S in carrying out their functions for the purposes of s 19(5) of the Insolvency Act 1986. T had been faced with a large number of tort claims arising out of the use of asbestos in its products. Under the policy, T was entitled to be indemnified against its ultimate net loss, which included established liabilities under asbestos claims and the costs of defending and handling such claims in excess of a retained limit. It was a condition of the policy that after the occurrence of an insolvency event or the reaching of the retained limit C should have the exclusive right to handle and defend claims and was entitled to reimbursement of such expen...

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