The case concerned claims by Standard Life Assurance Limited (SLAL) (by way of transfer from the Standard Life Assurance Company (SLAC)) against each of its professional indemnity insurers and its brokers in relation to underlying claims that arose out of the mis-selling of mortgage endowment policies, which resulted in payment to date by SLAC of over £100 million in compensation to over 97,000 investors. Although the individual claims made by investors had been relatively small, the average payment being well under £10,000, SLAC argued in its case against its insurers that the claims arose from a single originating cause or source and therefore exceeded the £25 million excess and triggered the indemnity provision in the policy.
As a matter of construction, Mr Justice Tomlinson held that a provision in the Schedule to the policy that described the excess as £25 million “each and every claim and/or claimant” did not permit the aggregation of claims by different investors against SLAC. As a result of this finding and given the value of the individual claims, it was “virtually inconceivable” that the policy would be triggered.
Tomlinson J then went on to address whether SLAC’s broker had been negligent in placing the cover. He held that there was no dispute as to the nature of the duties owed by Aon to SLAC. On this point, Tomlinson J referred to FNCB v Barnet Devanney [1999] Lloyd’s Rep IR 459 at 468 and to Talbot Underwriting v Nausch Hogan & Murray [2006] 2 Lloyd’s Rep 195 at 218 that established that it was the duty of a broker to obtain, as far as is possible, insurance coverage which clearly meets his client’s requirements. SLAC required cover that provided for the aggregation of related claims brought by many individual claimants. In concluding that Aon breached its duties to SLAC, Tomlinson J held that “No reasonably competent broker could reasonably have come to the view that SLAC’s requirements were clearly met“. As to causation, the judge was satisfied from both SLAC’s expert’s testimony and the factual evidence at trial that cover that met SLAC’s requirements could readily have been procured and, in light of the market conditions at the time of the 1998 placement, the cover could probably have been placed without any other alteration in its terms, in particular at the same premium.
The defences of contributory negligence and limitation raised by the brokers were both rejected. The insurers and the brokers also alleged that the Part VII transfer of business from SLAC to SLAL had the unintended consequence that neither SLAC nor SLAL had any relevant rights of action against the insurers or brokers but the arguments on this point were rejected.
This judgment has brought the topic of brokers’ duties back into the spotlight and we await with interest the judgment on the issues that await determination in Stage 2 of the trial. We will, of course, report further developments here on InsureReinsure.com.
