CBL Insurance liquidators’ $278 million claim against PwC was struck out by the High Court as being frivolous; PwC’s contract to provide actuarial services limited its potential liability to just over five million dollars: five times fees earned.
CBL Insurance Ltd was pushed into liquidation insolvent in February 2018. Liquidators McGrathNicol filed a claim against fellow professional services firm PriceWaterhouseCoopers alleging negligence in PwC’s actuarial assessment of CBL’s long-tail liabilities. In particular, liquidators allege CBL systematically under-priced premiums on cover offered for builders’ liability on French construction contracts and that it was unreasonably optimistic in reserving for potential claims. Years of under-reserving resulted in CBL reporting inflated profits for the years 2013 – 2016. In fact, no profits were earned, the liquidators allege. PwC provided actuarial services to CBL, issuing solvency certificates in support of CBL’s continued registration as an insurer.
At a preliminary High Court hearing, PwC had the negligence claim struck out as being frivolous, vexatious and an abuse of process. Justice Gault ruled the plain meaning of PwC’s contract with CBL Insurance limited potential liability to five times fees charged. A claim for $278 million was ridiculous when PwC fees for the period in question totalled some $1.1 million.
Liquidators were given leave to re-formulated their claim for a lesser amount.
Also struck out was legal action taken against both a PwC partner and an employee who personally signed off on the allegedly negligent solvency certificates. In the PwC contract, CBL Insurance had agreed in no circumstances would it sue either PwC staff personally or any contractors employed by PwC to carry out its work.
CBL Insurance Ltd v. PriceWaterhouseCoopers – High Court (11.06.21)
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