In Templeton Insurance Ltd v Motorcare Warranties Ltd [2010] EWHC 3113 (Comm) the Commercial Court heard a dispute between Templeton, an insurance company incorporated in the Isle of Man, engaged in the business of selling mechanical breakdown insurance (MBI), and its UK agent, Motorcare.

The principal-agent relationship between Templeton and Motorcare was governed by four annual slip policies from 2004 to 2008. Under the MBI contracts, Templeton had expected loss ratios of around 90% but they were closer to 110%, resulting in heavy losses as claims exceeded premiums. As a result of these losses, the relationship broke down and Templeton sought recovery of premiums allegedly owing to it making the following assertions: (1) Motorcare had provided MBI for vehicles such as taxis which were expressly excluded under each of the policies terms. (2) Motorcare had failed to properly account for the premiums received. (3) Motorcare had paid premiums on a 60:40 split (in Templeton’s favour) instead of at the premium rates specified in the Rate Schedule of the policies. (4) Motorcare knew that the loss ratios were higher than it had told Templeton and, as a result, Templeton had been misled into renewing the policy each year.

Mr Justice Simon gave judgment for Templeton finding the following: (1) Motorcare had clearly provided MBI outside the terms of the policies without the requisite prior approval of Templeton. (2) Motorcare had failed to provide Templeton with adequate information about the MBI it was selling. (3) There was no evidence of an agreement extending any further than a single transaction to split the premium 60:40. (4) There had been a clear intention on the part of Motorcare to conceal the true loss ratio in the run up to the renewal of the third slip in order to induce Templeton to renew the policy.