Brokers Under A Duty To Consider Terms Of Insurance And Suitability Every Year

Author:Ms Sharon Daly, Helen Noble and Darren Maher
Profession:Matheson Ormsby Prentice

To read the full edition of the Insurance Newsletter, Autumn 2011, click here.

Following the recent English Commercial Court decision in Beazley Underwriting Limited and another v. The Travelers Companies Incorporated, brokers should ensure that the risk of the Insured, the cover on offer and the suitability of the cover are considered properly every year, and not only on the original placement.

This decision is a follow-on decision from the decision in Standard Life v. Oak in which Aon was held liable to Standard Life in negligence for failure to procure suitable insurance cover. Aon subsequently looked to Travelers under an indemnity provided by Travelers to Aon on the sale of Minet Group of broking companies to Aon on the basis that the negligence occurred before Aon purchased the Minet Group. The Minet book of business included the Standard Life account. Aon continued to renew Standard Life's PI insurance on it predecessor's expiring terms. Travelers paid Aon pursuant to the indemnity and Travelers made a claim on its PI policy. The present litigation was concerned with Travelers' corresponding claim against its own PI insurers. Travelers insurers rejected the claim and successfully argued that Travelers were not liable to Aon under the deed of indemnity and that even if Travelers was liable to Aon there was no claim under the PI policy.

While the decision is not binding in Ireland it contains some interesting dicta on brokers' duties on renewal. The court disagreed with expert evidence which claimed that there is a duty on a broker each year to see if the wording reflected the client's needs but that the duty would be complied with if having ascertained his client's needs had not changed, he rolls forward the cover on the terms of the previous year. The court held that the broker is under a duty to consider the terms of the insurance and their suitability every year particularly where the insurance was markedly different to other years. In the court's view, Aon was subject...

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