£10m PI hit for Dunlop Haywards

28/01/2008

A high court ruling has left property services firm Dunlop Haywards facing a £10 million Professional Indemnity (PI) claim, it has emerged.

Cheshire Building Society has been pursuing a claim against the firm after uncovering a suspected fraud in its 2005 accounts.

Dunlop Haywards valuer Ian McGarry told Cheshire in 2005 that a building it was lending money against was worth £16 million..

But once the borrower defaulted on repayments, the structure was revalued at £1.5 million, leaving the building society to cover the loss.

Judge David Steel ruled in the high court that Dunlop Haywards, part of the Erinaceous Group, should pay an interim payment of £10 million to Cheshire Building Society.

Meanwhile, the property firm expressed an intention to claim the money back from its PI policy on the grounds that Mr McGarry acted fraudulently in the matter.

The importance of adequate PI cover is further highlighted by the comments made by one Dunlop Haywards shareholder.

In April 2006, when the case began, the unnamed shareholder told Property Week: "Erinaceous is covered by PI insurance for any fraud."

As such, he planned to reinvest in the company if the share price were to drop during the case.

I will buy back my shares when it drops a little more, as in the long term they are executing flawlessly," he explained.

PYV are one of the UK's leading providers of professional indemnity insurance. This news article has been produced by Adfero in collaboration with PYV and its unauthorised use is not permitted.

(c) 2008 Adfero Ltd.

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