CNA Insurance Company (Europe) Limited v Servico International Limited & Ors

An agreement allowing an intermediary to collect insurance premiums from customers does not, without necessity, imply terms requiring the insurer to co-operate in those collections or restraining the insurer from collecting its own unpaid premiums after termination. The intermediary remains liable for premiums due on pre-termination business.

However, an allegation that the insurer failed reasonably to mitigate loss by collecting premiums, or by taking steps affecting continuing cover, may affect quantum. It should not be excluded at the summary-judgment stage where it raises an arguable issue requiring determination.

CNA obtained Part 24 summary judgment for nearly £11 million against Servico companies under an insurance slip. The arrangement enabled Servico to provide motor insurance in CNA’s name. Servico was liable for agreed premiums, including premiums due before termination of the arrangement.

David Steel J rejected Servico’s argument that CNA’s post-termination collection of premiums from insured customers ended Servico’s payment obligation. Servico sought renewed permission to appeal on that issue and sought to advance a further mitigation and quantum argument. Numerous ancillary applications concerned fresh evidence, disclosure, privilege and witness summonses.

The central issue was whether CNA’s actions in collecting premiums, or its alleged failure to collect or cancel cover reasonably, could relieve Servico of liability or affect the amount recoverable.

1. Permission to appeal was granted in part. Lord Justice Tuckey, with whom Lord Justice Rix agreed, dismissed the renewed application concerning the proposed implied terms in grounds 5 and 6. The court nevertheless extended permission so that Servico could argue that CNA’s alleged failures in collecting premiums, or related mitigation issues, affected the quantum of its claim.

2. The slip did not address Servico’s collection of premiums from its customers. Before termination, Servico’s entitlement to collect did not require CNA’s co-operation and there was no necessity to imply a term requiring it. After termination, Servico remained liable for premiums on prior business. There was no basis to imply terms preventing or inhibiting CNA from recovering premiums due under policies issued in its name but unpaid by Servico.

3. CNA had to account for any difference between the premium it recovered from customers and that payable to it by Servico. The proposed allegation that CNA had failed to collect with reasonable diligence, or had acted unreasonably concerning continuing cover, went to quantum. Servico should be permitted to contend on appeal that the judge had rejected that issue too readily at the summary-judgment stage. The court left the existence of any relevant implied term, the adequacy of mitigation, and the consequences for the judgment to the substantive appeal.

4. The court left applications to admit further evidence for the court hearing the appeal, unless agreed. It refused to admit documents concerning Mr Richards, declined to order a witness summons or disclosure from solicitors, and declined to compel production of brokers’ notes. Those matters were irrelevant to the limited appeal issues or raised potential privilege and procedural complications. Costs of the hearing were ordered to be costs in the appeal.

• Court of Appeal (Civil Division): In [2002] EWCA Civ 654, the court granted limited additional permission to appeal on mitigation and quantum, but refused renewed permission on the proposed implied-term arguments. It also determined the ancillary applications.
• High Court of Justice, Queen’s Bench Division, Commercial Court: David Steel J gave CNA Part 24 summary judgment for nearly £11 million against the Servico companies on 12 December 2001.