HIH Casualty and General Insurance Ltd. v JLT Risk Solutions Ltd

A broker’s post-placement duty depends on the circumstances. Where the broker identifies information that may materially affect cover, the broker must exercise reasonable care by alerting the relevant client and, where appropriate, seeking instructions and agreement from insurers or reinsurers. Merely circulating a report may be insufficient. The existence of a breach does not establish liability unless the claimant proves that the breach caused the loss claimed. Speculative evidence about what insurers or reinsurers might have done is inadequate. A claimant’s own decision to pay an insured claim, despite knowing that reinsurers disputed liability, may also be relevant to contributory negligence.

HIH, the insurer and reinsured, claimed damages from JLT, its broker, for losses said to result from the failure to recover from reinsurers after HIH paid claims relating to three film-finance transactions. The underlying insurance and reinsurance were intended to be back-to-back. The number of films in each slate was reduced after placement, and the reductions were mentioned in risk-management reports circulated to HIH and reinsurers.

HIH alleged that JLT should have obtained agreement to the reductions or specifically alerted HIH to their significance. JLT denied any relevant post-placement duty and disputed causation. The principal issues were the scope of JLT’s duty, breach, causation, contributory negligence and mitigation.

1. The claim was dismissed. Although JLT owed a relevant post-placement duty and breached it, HIH failed to prove that the breach caused the loss claimed.
2. The duty was fact-sensitive. JLT was not merely a postbox. Because it continued to circulate information about the films, knew that the reinsurance was intended to remain back-to-back, and appreciated the importance of the number of films and sales estimates, it should have read the risk-management reports carefully and alerted HIH and reinsurers to information that was, or ought to have been, a potential coverage concern. JLT should have sought instructions or ensured that HIH was sufficiently aware of the issue to decide what instructions to give.
3. The reductions in the number of films were material information. Circulating the reports was insufficient in the circumstances. JLT should have drawn the issue expressly to the attention of those then responsible at HIH, rather than raising it informally only with a former HIH underwriter. The court explained the context-sensitive approach in Youell v Bland Welch & Co (No 2), known as The Superhulls Cover Case, [1990] 2 Lloyd’s Rep 431.
4. Causation was not established. Even if JLT had alerted HIH and reinsurers earlier, HIH had not shown that reinsurers would have agreed to the reductions, waived their rights, or become legally bound to indemnify HIH. Nor had HIH shown that earlier knowledge would have caused it not to pay the claims. Its payments were made when it knew of the reductions and, for H2 and H3, knew that reinsurers disputed liability.
5. The court therefore did not need to decide contributory negligence or mitigation. It indicated that, if necessary, HIH would have been 70 per cent responsible and JLT 30 per cent responsible, principally because HIH failed to address the reports and paid despite the known dispute.

The judgment described earlier decisions in the same litigation concerning the film-finance insurance and reinsurance. Those decisions were not under appeal in this claim and are excluded from the cited-case analysis.