Gaughan v Tony McdOnagh & Co Ltd.

A broker’s duty may continue after an insurance policy is placed where the alleged breach concerns a later communication of material risk information. Limitation therefore runs from the later breach, rather than automatically from inception or renewal of the policy. Summary judgment and strike-out are inappropriate where causation depends on real factual disputes, including whether insurers would have avoided the policy in any event and whether the claimant lost an opportunity to obtain alternative cover.

The claimant alleged that the defendant insurance broker misstated the hotel’s occupancy in a fax sent to insurers on 11 November 1998. Insurers subsequently avoided the policy after a fire. The defendant applied for summary judgment under CPR Part 24 and strike-out under CPR Part 3.4, arguing that the claim was time-barred and that the alleged breach had not caused the loss because the policy would have been avoided in any event.

1. Applications dismissed. The defendant was not entitled to summary judgment or strike-out.
2. The authorities relied on for the general proposition that a negligence claim against an insurance broker accrues when insurance is placed did not determine this case. The alleged breach concerned a later fax which, for the first time, misstated the hotel’s occupancy. The broker therefore arguably remained subject to a continuing obligation to report accurately information material to the risk. The earlier failure to include the hotel in the policy schedule had been remedied and was not relied upon.
3. The limitation issue was consequently sufficiently arguable to proceed to trial. The case was materially different from Knapp v Ecclesiastical Insurance Group plc and Bell v Peter Browne, where the alleged breaches occurred at inception or renewal.
4. There were real evidential disputes about the hotel’s condition, why asylum seekers ceased to occupy it, whether insurers would have avoided the policy for other non-disclosures, and whether the claimant could establish an alternative loss-of-opportunity case. Those matters could not properly be resolved on a Part 24 application.