Temple Legal Protection Ltd v QBE Insurance (Europe) Ltd

The court considered an appeal under section 69 of the Arbitration Act 1996 against an arbitrator’s decision that QBE had validly brought Temple’s authority to conduct the run-off to an end. The principal legal question was the proper construction of clause 10.2.2 of the underwriting agency agreement (the "Binder") and whether the Binder conferred on Temple an entitlement to manage the run-off which QBE could not revoke unilaterally.

The court held that clause 10.2.2 is expressed as an obligation on Temple to continue to perform post-termination obligations in respect of policies bound prior to termination unless QBE agrees otherwise or regulatory constraints apply, and does not create an irrevocable right or entitlement in Temple to manage the run-off. The broader contractual matrix, the Coverholder Agreements and the ATE Certificate of Insurance, when read together with the Binder, did not displace that construction. The court also rejected the submission that general agency doctrines or an agency "coupled with an interest" rendered Temple’s authority irrevocable on the facts and terms before the court.

Background and parties: Temple Legal Protection Ltd (an underwriting agency specialising in legal expenses insurance) entered a Binder with QBE Insurance (Europe) Ltd beginning 1 January 2006. Relations deteriorated and the Binder was terminated by at the latest 2 December 2006. The arbitrator (Mr J H Leckie) held that QBE validly terminated Temple’s authority to conduct the run-off and, by letter of 4 January 2007, assumed claims-handling functions. Temple sought to challenge this conclusion by appeal under section 69 of the Arbitration Act 1996.

Nature of the application / relief sought: Temple appealed the arbitrator’s Award No. 1 (4 July 2007) seeking a declaration that QBE was not entitled to revoke Temple’s authority to manage the run-off and that Temple retained an entitlement to conduct run-off administration after termination of the Binder.

Issues framed:

1. Whether, on the true construction of the Binder (in particular section 10.2.2) and read with the incorporated Coverholder Agreements and Certificates of Insurance, Temple had an entitlement to manage the run-off which QBE could not revoke unilaterally;
2. Whether principles of agency law (including authority "coupled with an interest" and related doctrines) or the contractual matrix produced an irrevocable agency in favour of Temple;
3. Whether the arbitrator erred in his approach to construction by starting from common law agency principles rather than the contractual language and commercial matrix.

Court’s reasoning (concise): The court examined the Binder, the model Coverholder Agreement and the ATE Certificate. It concluded that:

• Section 10.2.2 is worded as an obligation on Temple to remain liable to perform its obligations in respect of insurances bound prior to termination unless QBE agrees otherwise or regulatory limits apply; the clause does not naturally create an exclusive entitlement in Temple to manage the run-off.
• Many provisions relied on by Temple (for example sections 8 and 24 describing duties and claims procedures) do not survive termination and thus cannot be read as creating an irrevocable post-termination entitlement to administer claims and premiums.
• The Coverholder Agreements and the Certificate of Insurance, although giving Temple an operational role and creating expectations with coverholders, do not displace the construction of the Binder; they contemplate Temple acting as agent for QBE and the insureds’ substantive rights lie against QBE.
• Common law agency principles did not require construction of the Binder as conferring an irrevocable authority to Temple in the particular contractual and factual matrix; security-type or "coupled with an interest" arguments did not prevail on these documents and facts.

Outcome: The court concluded that, albeit the arbitrator’s reasoning was not fully justified, his conclusion was correct on the proper construction of the contract and dismissed the appeal.

The appeal is dismissed. The court accepted that while the arbitrator’s starting point (reference to general agency principles) was not justified, the correct construction of the Binder is that section 10.2.2 imposes an obligation on Temple to perform post-termination duties unless QBE agrees otherwise or regulatory constraints apply, and does not create an irrevocable entitlement in Temple to manage the run-off; accordingly QBE was entitled to terminate Temple’s authority to conduct the run-off as the arbitrator had held.

Arbitration Award No. 1 made by Mr J H Leckie on 4 July 2007; permission to appeal to the High Court granted by Teare J on 9 October 2007; appeal heard in the Commercial Court before Beatson J, judgment dated 23 April 2008 ([2008] EWHC 843 (Comm)).