Brokers’ negligence – guidance on the scope of the duty and causation

In Dalamd Limited v Butterworth Spengler Commercial Limited [2018] EWHC 2558 (Comm), Mr Justice Butcher considered a negligence claim against the Defendant insurance broker arising out of a fire at a waste recycling facility. The insured’s claim succeeded in part.

In his decision, the Judge provided a useful recap on brokers’ duties, in particular their duty to advise clients on their pre-inception duties of disclosure. Of particular note, he also considered how causation should be analysed in brokers’ negligence cases where the insured has not pursued the claim against its insurer to settlement, judgment or award. His conclusion – which will be well received by brokers – was that whether a good defence to the policy claim was available to an insurer will be assessed on the balance of probabilities (i.e. a yes/no basis), and not a loss of a chance basis. Whether there was another defence available to the insurer, for which the broker was not responsible, will likewise be assessed on the balance of probabilities, although the issue of whether the insurer would have pursued that point is to be assessed based on loss of chance.

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Reminder to brokers of the need to advise insureds on policy terms

In RR Securities Ltd v Towergate Underwriting Group Ltd [2016] the Court held a broker liable for failing to advise its insured client that certain safety precautions were required by insurers as a condition precedent to cover under a property policy.  The case serves as a reminder to brokers of the importance of advising clients on the terms of the policies they place, particularly onerous terms such as conditions precedent.

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Court of Appeal confirms insured’s entitlement to a declaration of indemnity for cost of reinstatement of property damaged by fire

In Great Lakes Reinsurance (UK) SE v Western Trading Limited [2016] EWCA Civ 1003 the Court of Appeal confirmed that the court may make a declaration that an insured under a property insurance policy is entitled to be indemnified for the cost of reinstating property damaged by an insured peril, particularly in circumstances where it is unclear whether the insured intends or is able to reinstate the property. The case also provides helpful guidance on the insured's right to be indemnified on a reinstatement basis under a property insurance policy.

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Supreme Court rules that a “collateral lie” is immaterial to the insurance claim

In Versloot Dredging BV and another v HDI Gerling Industrie Versicherung AG and Others [2016] UKSC 45, the Supreme Court held that policyholders who advance otherwise valid insurance claims by lies which are irrelevant to their rights to recover do not forfeit their claims under the policy: "the lie is dishonest but the claim is not". In doing so, the Supreme Court overruled the decision of the Court of Appeal ([2015] QB 608), and rejected the analysis of the law by Mance LJ (as he then was) in Agapitos v Agnew (The Aegeon) [2003] QB 556 ("The Aegeon") (on which the Court of Appeal decision had been based) that an insured who supports a valid claim with a lie forfeits his claim.

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Insurer’s subrogation rights in relation to leasehold premises revisited

In Elizabeth Frasca-Judd v Galina Golovina [2016] EWHC 497 (QB), the High Court has held, applying Mark Rowlands v Berni Inns Limited [1986] QB 211, that where a landlord insured property for the benefit of herself and her tenant, the insurer could not bring a subrogated claim against the tenant for damage caused by breach of contract and/or negligence.

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A “blot on English insurance law”

Insurers successfully avoided a policy on the grounds of inadvertent non-disclosure. The High Court commented on the different outcome that would have been available under the Insurance Act 2015 which comes in to force in August 2016, remarking that the stringent remedy of avoidance under the present law remains a "blot on English insurance law". 

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