Temple Legal Protection Ltd v QBE Insurance (Europe) Ltd

An underwriting agency agreement must be construed objectively, in its commercial context, without assuming the parties’ intention from general agency law. A clause requiring an agent to remain liable to perform post-termination obligations does not, without clear language, confer an entitlement to continue exercising authority. Where the agreement gives the principal the right to terminate the agency relationship, and the agent’s fiduciary position and control of the principal’s money are material, the court will not readily construe the agreement as requiring the principal to retain the agent for the entire run-off period. Incorporated coverholder agreements and insurance certificates must be read with the principal agreement and do not create a separate irrevocable right unless their language clearly does so.

Temple, a legal expenses insurance underwriting agency, appealed under section 69 of the Arbitration Act 1996 against an arbitrator’s award concerning the run-off of after-the-event insurance business written under an underwriting agency agreement with QBE.

The arbitrator held that QBE could terminate Temple’s authority to conduct the run-off by unilateral notice. Temple argued that the agency agreement, read with incorporated coverholder agreements and certificates of insurance, gave it an entitlement to manage the run-off after termination. QBE contended that the agreement imposed continuing obligations on Temple but preserved its right to take over the business.

1. The appeal was dismissed. The arbitrator’s reasoning, which began with the general law of agency, was not justified, but the conclusion was correct on the proper construction of the Binder.

2. The court examined the agreement objectively in its commercial context. The Binder formed part of a linked contractual structure including coverholder agreements and certificates of insurance, but the Binder remained the starting point. Section 10.2.2 stated that Temple would remain “liable to perform its obligations” after termination unless QBE agreed otherwise. That language imposed an obligation and did not create an entitlement or continuing authority.

3. Section 10.2.1, which allowed Temple to cancel, extend, amend or alter existing insurances, did not confer authority to handle claims, claims money, premiums or other classic run-off functions. The survival provisions also did not establish an irrevocable right. In particular, the duties of care, skill and diligence in section 8 and the claims procedure in section 24 did not survive termination.

4. The contrary construction would require QBE to leave Temple in control of its risks and money even after termination for fraud, serious misconduct, insolvency, criminality, material breach or a change of control. The agreement contained no nuanced protection comparable to the provisions governing commission. The long duration of the run-off was therefore a consideration operating both ways and did not make Temple’s proposed construction commercially necessary.

5. The coverholder agreements and certificates were incorporated into the Binder, and QBE had a contractual nexus with the coverholders for relevant purposes. Their provisions were nevertheless contingent on Temple retaining authority under the Binder. They did not require Temple to conduct the run-off in every circumstance or prevent QBE from replacing it.

6. The common law of agency was relevant only as an aid to construction. The fiduciary character of the relationship and QBE’s loss of trust and confidence supported the conclusion that, absent clear contrary language, QBE could assume control of its own affairs. The principles concerning irrevocable authority and agencies coupled with interests did not apply on these facts.

The question of law was determined in favour of QBE.

The judgment was a first-instance appeal under section 69 of the Arbitration Act 1996 against an arbitrator’s Award No. 1. Permission to appeal had been granted by Teare J on 9 October 2007.