Ground Gilbey Ltd & Anor v Jardine Lloyd Thompson UK Ltd

An insurance broker must take reasonable steps to obtain cover which clearly meets the client’s requirements and must draw attention to onerous or unusual terms. The continuing duty includes advising the client of information having a material and potentially adverse effect on cover. Where negligent broking leaves an insured with uncertain rights against insurers, the court assessing loss need not finally determine the insurers’ liability unless the answer is beyond doubt. It must assess whether the settlement fell within the range of settlements which reasonable commercial parties might have made. The recoverable loss is the difference between the settlement actually obtained and the amount probably recoverable had the broker acted with reasonable skill and care.

The claimants owned parts of Camden Market and sued their former insurance brokers after a fire caused by an LPG portable heater. The brokers had failed to pass on an insurer’s October 2007 risk improvement requiring the immediate removal of portable heating appliances and had not adequately advised on a survey condition affecting cover.

The claimants settled their insurance claim for £3.825 million and sought the shortfall from the brokers. The principal issues were breach of duty, causation, the reasonableness of the settlement, quantum and contributory negligence.

1. Liability. The defendant brokers were negligent. They knew that portable heaters continued to be used and that the market regarded their use as necessary pending approval of a safe alternative. They should have explained the significance of the October 2007 risk improvement, advised that cover might be prejudiced, and obtained instructions.
2. The survey condition was not inherently onerous or unusual. In this context, however, it formed part of the insurers’ continuing concern about portable heaters and should have been drawn to the claimants’ attention and explained.
3. The October 2007 risk improvement applied to both the Stables and Canal Markets. It was not complied with. Proper advice would probably have led to a constructive dialogue with the insurer about removing the heaters or approving a safe substitute. The claimants therefore established causation.
4. Settlement. The court applied the approach in Mander v Commercial Union Assurance Co plc [1998] Ll Rep IR 93 and BP plc v AON Ltd (No 2) [2006] 1 C.L.C. 881. The issue was whether the settlement was within the range which reasonable commercial parties might have made, not whether the insurer’s defence was objectively certain. The £3.825 million settlement was reasonable, although towards the edge of that range.
5. Quantum. The parties would probably have reached a cash settlement at about the same time even without the negligence. The best evidence was the £5.6 million valuation given to Leading Counsel. The loss was therefore £1.775 million.
6. The claimants were not contributorily negligent. Judgment was entered for the claimants in the sum of £1.775 million, with interest and consequential matters to be addressed thereafter.