Markel International Insurance Co Ltd v Surety Guarantee Consultants Ltd & others; (1) QBE Insurance (Europe) Ltd (2) Amalfi Underwriting Ltd v Surety Guarantee Consultants Ltd & others [2008] EWHC 1135 (Comm) concerned a joint trial of two separate but similar cases brought by each of Markel and QBE, together with Amalfi, in which they alleged that the Defendants had defrauded them in connection with the writing of surety bonds between January 2005 and 2006.

The Claimants alleged that Surety Guarantee Consultants Ltd (SGC), a niche firm of surety bond underwriters that is now in liquidation, wrote bonds which exceeded the limits, in particular the financial limits, of its Binding Authority with Markel and of the Management Agreement with Amalfi. By exceeding the limits of authority, the Claimants asserted that SGC had exposed them to greater liabilities than they had agreed to bear and it had enabled SGC to obtain premium payments in excess of those to which they would have been entitled had they kept to the terms of the agreements. The excess premium had not been paid to the Claimants. Accordingly, the Claimants sought to recover their losses and the unpaid premium from the four individual Defendants, three of whom had been executives of SGC and the fourth individual had been a director of Templeton Insurance Limited.

Mr Justice Teare held that three of the four individual Defendants were liable to the Claimants for conspiracy to defraud the Claimants and the three Defendants who had been former executives of SGC were liable to the Claimants for breaching their fiduciary duties by the making of secret profits.

Teare J did not rule as to the loss and damage so far suffered by the Claimants but said that an inquiry as to damages should be ordered, together with an indemnity in respect of future losses. Markel sought an order for the payment of interim damages and the judge noted that QBE/Amalfi might also seek such an order in circumstances where their damages have not been finally assessed. Teare J agreed to consider such applications when all other applications for ancillary orders were made. We will keep you updated of future developments at www.insurereinsure.com.