The Law Society and Solicitors Regulation Authority have been granted leave to intervene in a case that could have a major impact on professional indemnity insurance for law firms.

The High Court granted a joint application from both bodies in the case of Godiva Mortgage Ltd v Travelers Insurance.

The Society took action after the insurer attempted to cap its cover by aggregating claims against a Berkshire firm, Willmett Solicitors, which has since closed.

In a statement, the Law Society said: ‘The case arose out of the activities of a conveyancing partner at a reputable and well-established Berkshire firm.

‘When losses came to light as a result of the financial crisis, numerous claims were brought against Willmett Solicitors and its partners by various lenders, including the claimant Godiva Mortgage Ltd.’

Travelers Insurance asserted that the activities of one partner could be aggregated as ‘one claim’ and refused to pay sums beyond £2m.

As a consequence, some partners at Willmett have already been made bankrupt and the remainder face bankruptcy.

The firm closed in 2009 and has no funds to meet any claims.

The Law Society intervened on the basis of major concerns for the profession and the public interest.

It was joined in the action by the SRA, which raised concerns about the potential impact of the case on the Compensation Fund, the discretionary fund of last resort for anyone affected by a solicitor’s dishonesty or failure to account. Estimates for the Willmett case losses are in excess of £50m.

Law Society chief executive Desmond Hudson said: ‘It was vital that we, as well as the SRA, were able to intervene in this case. The insurer’s interpretation of the aggregation clause, which led them to cap their insurance indemnity, could have widespread significance for the public as it will affect many claimants’ right of redress.

‘It is also of great concern to the profession in terms of their PII coverage and hence to the society to ascertain how aggregation applies in a case such as this.

‘Our members need to have confidence in their PII cover, and this could cast doubt on what they and their clients are protected against.’