Dunlop Haywards (DHL) Ltd & Ors v Barbon Insurance Group Ltd & Ors

An insurance broker must exercise reasonable skill and care to ascertain the client’s insurance needs, obtain cover meeting them, review proposed terms, explain material limitations, and ensure that the policy accurately records the agreement.

Where instructions would substantially reduce existing cover, a placing broker must query, clarify or confirm them, particularly where the change appears disadvantageous or inconsistent with the client’s requirements. Rectification requires proof of a continuing common intention, outward expression of accord, and a mistake causing the instrument to misstate that intention. Reliance on professional brokers will not ordinarily amount to contributory negligence where the client was given misleading reassurance.

The claimants sought an indemnity under a 2005/06 excess professional indemnity policy for valuation claims. The policy insured the Erinaceous Group and limited indemnity to commercial property management activities. The claimants contended that the policy should be construed as covering DHL’s valuation work or rectified to reflect that intention.

The claimants also claimed damages against their broker, Barbon Insurance Group Ltd, formerly HPC. Barbon pursued a related claim against Lockton Companies International Ltd, formerly Forbes, the placing broker. The central issues were construction, rectification, contributory negligence, breach of broking duties, causation and apportionment.

1. Construction. The excess policy did not cover the valuation claims. Applying the approach confirmed in Chartbrook Ltd v Persimmon Homes Ltd [2009] 3 WLR 267 and ICS v West Bromwich [1998] 1 WLR 896, “commercial Property Management activities” had its ordinary and commercial meaning. It was distinct from property surveying and valuation. The wording could not be recast as referring to DHL’s activities.
2. Rectification. The requirements stated in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 E.G.L.R. 71, as approved in Chartbrook Ltd v Persimmon Homes Ltd [2009] 3 WLR 267, were not satisfied. The evidence showed that the parties’ continuing common intention was to insure commercial property management activities for the Group. The slip and policies reflected that agreement. The rectification claim therefore failed.
3. Broker duties. An insurance broker’s general duty of reasonable skill and care includes ascertaining the client’s needs, obtaining suitable cover, reviewing quotations, explaining material terms and limitations, and ensuring that the policy is clear and accurate. This reflected the principles in Youell v Bland Welch & Co Ltd [1990] 2 Lloyd’s Rep. 431.
4. Barbon breached those duties by failing to identify and explain the limiting condition, by representing that the arrangement covered all bases, and by failing to correct the position despite repeated opportunities. The claimant’s reliance on its professional brokers was reasonable. There was no contributory negligence under section 1(1) of the Law Reform (Contributory Negligence) Act 1945. Alternatively, any responsibility attributable to the claimant would have warranted no reduction.
5. Lockton was negligent in failing to query a materially disadvantageous change from DHL cover to limited Group cover and in failing to comply with the agreed “no worse” instruction. Its breach contributed to the loss, but Barbon bore 80 per cent of the responsibility and Lockton 20 per cent.
6. The claimants’ claim against the Excess Insurers failed. Their claim against Barbon succeeded in full for £10 million. Barbon’s claim against Lockton succeeded, subject to an 80 per cent reduction for Barbon’s contributory negligence.

The judgment records an earlier interlocutory appeal concerning the joinder of the Excess Insurers, but does not provide its citation. This judgment determined the substantive claims at first instance.