Heath Lambert Ltd v Sociedad De Corretaje De Seguros & Anor

A producing broker is generally liable to its placing broker for premiums, although special factors may establish direct contractual relations between the principal and placing broker. A London placing broker may remain responsible for premiums even where the insurance or reinsurance policy is governed by foreign law, particularly where the market relationship is governed by English law and the policy contains a broker’s cancellation clause.

Where a policy grants credit for payment of premium, the credit normally benefits the principal as well as the broker. The broker’s indemnity claim accrues when the credit period expires. An acknowledgment requires an admission of legal liability to pay, not merely recognition that premiums remain outstanding.

Heath Lambert sought payment of unpaid premiums arising from extensions to marine reinsurance arranged in the London market for Banesco, with Scort acting as Venezuelan broker for the underlying insured. Heath Lambert obtained permission to serve proceedings in Venezuela. Scort and Banesco applied to set aside service, contending that neither was liable, that Heath Lambert had paid underwriters voluntarily, and that the claims were time-barred.

The court considered the contractual allocation of liability, the effect of Marine Insurance Act 1906 section 53, the credit terms governing premium payment, and alleged acknowledgments under Limitation Act 1980 section 29(5).

1. The applications succeeded in part. Service was set aside for all claims except the claim for $261,632.01 relating to the final extension of the ICOA cover.
2. As to liability, the ordinary rule is that the producing broker is liable to the placing broker for premium. Direct contractual relations between principal and placing broker require special factors. The evidence gave rise to a powerful case against Scort, but it remained reasonably arguable that Scort was not liable and that Banesco was liable. It was therefore premature to determine which defendant was liable.
3. Heath Lambert had a reasonable prospect of establishing that it was entitled to indemnity. Even if the reinsurance were governed by Venezuelan law and Marine Insurance Act 1906 section 53 applied only to English-law policies, London market practice and the broker’s cancellation clause strongly supported responsibility to underwriters.
4. The clause warranting premium payment within 90 days of attachment granted credit for that period. The credit applied to later extensions incorporated on the same terms. The May 1996 ICOA extension was different because its slip provided for payment within 45 days, with a settlement due date of 15 June 1996.
5. The causes of action accrued when the relevant credit periods expired. Under Limitation Act 1980 section 29(5), acknowledgment required admission of the sender’s legal liability to pay. The letters relied on acknowledged that premiums were outstanding but attributed liability to INC and did not acknowledge liability by Scort or Banesco.
6. The claim for the final ICOA extension was not time-barred. The argument that recovery was limited to sums actually paid to underwriters was rejected in light of Power v Butcher and Universo Insurance Co. of Milan v MMI Co Ltd.