Court Rules in Favor of AE Insurance Brokers in Negligence Dispute Led by Hamsard One Thousand and Forty-Three Limited

Citation: [2024] EWHC 262 (Comm)
Judgment on

Introduction

The commercial dispute between Hamsard One Thousand and Forty-Three Limited (“Hamsard”) and AE Insurance Brokers Limited (“AE”) sheds light on the duties of an insurance broker and the repercussions of alleged negligence in fulfilling those duties. The case, presided over by Lionel Persey KC sitting as a Judge of the High Court, examined the obligation of the broker to provide accurate and complete information to the insurer, the duty to secure appropriate insurance coverage based on the client’s needs, and the implications of breaches in these duties on causation and loss.

Key Facts

Hamsard claimed AE failed to disclose material information to insurers, leading to the avoidance of a property insurance policy by Fusion Insurance Services Limited (“Fusion”). AE counterargued that Hamsard’s claims were predicated on the mendacity of Hamsard’s principal, Mr. Mark Beresford. Key points were AE’s alleged omissions to disclose Mr. Beresford’s links to prior companies’ failures and that their tenant, Incanite Foundries Limited, was under administration. Hamsard claimed consequential losses resulting from the absence of insurance cover for property damage and lost rent, totaling over £2.6 million.

Several established legal principles were applied in determining the case outcome:

  1. Broker’s Duty of Care: In line with cases such as Standard Life Assurance v Oak Dedicated Ltd and Dunlop Haywards (DHL) Ltd & Others v Barbon Insurance Group Ltd, a broker must carefully ascertain the client’s needs, obtain insurance that meets those needs, clarify the coverage extents and limitations, ensure policy language is clear, and reassess the client’s needs upon policy renewal.

  2. Duty to Disclose: Following Jones v Environcom Ltd (No 1), the broker must elucidate the client’s duty of disclosure, the repercussions of non-disclosure, and ensure sufficient disclosure of material facts.

  3. Assumption of Information and Waiver: The case examined sections within the Marine Insurance Act 1906, discussing circumstances where information is considered waived by the insurer when they do not expressly request it, as seen in Doheny v New India Assurance Co Ltd.

  4. Consequential Loss: The case invoked legal precedents such as Verderame v Commercial Union Assurance Co Plc and Ramwade Ltd v WJ Emson & Co Ltd to review the recoverability of consequential losses in insurance litigation.

Outcomes

The Court decided in favor of AE, dismissing Hamsard’s claims. Key findings included:

  • AE’s defense of waiver was accepted concerning non-disclosure of Mr. Beresford’s past directorships, as Fusion had not explicitly requested this information, effectively waiving their right to it.

  • AE was found not to have breached duties in relation to the non-disclosure of Incanite’s administration due to a balance of probabilities indicating AE did inform Fusion.

  • The Court determined that loss of rent coverage was not needed by Hamsard, thus not breaching any duty there.

  • Accidental damage coverage was not included in the policy, and Hamsard’s principal showed no prior interest in such coverage. It was concluded that even if AE did breach their duty, Hamsard would not have been able to afford or acquire alternative coverage under the given financial circumstances.

Conclusion

This case underscores the meticulous nature of insurance broking where detailed attention to clients’ needs and proactive communication are paramount. It reiterates established legal standards for brokers’ duties and examines the concept of waiver in disclosing information to insurers. Ultimately, the judgement exonerated AE of negligence and found that even in the presence of disclosure, Hamsard would not have received coverage for the alleged damages and lost rent due to their financial state and lack of a covering insurance policy. The decision serves as a valuable precedent for the scope of a broker’s duty, expectations of disclosure, and the consequences of the loss of insurance cover.