Hamsard One Thousand and Forty-Three Limited v AE Insurance Brokers Limited

An insurance broker is required to identify the client’s insurance needs, obtain suitable cover, explain material limitations and ensure that policy terms are clear. Those duties are fact-sensitive. Where the insurer has asked precise questions about insolvency or bankruptcy, and has not asked about companies connected with the proposer, the insurer may have waived disclosure of that wider information under section 18(3)(c) of the Marine Insurance Act 1906. A client who receives policy documents and is asked to check that the cover meets its requirements may bear responsibility for failing to identify an obvious exclusion. Recovery in broker-negligence claims is ordinarily limited to the shortfall in the cover that should have been obtained, unless the broker assumed wider advisory duties.

Hamsard claimed damages from its former broker, AE, alleging that failures in placing property insurance caused Fusion to avoid the policy and left Hamsard without cover for damage to industrial premises.

The alleged breaches concerned non-disclosure of the claimant directors’ association with failed companies, non-disclosure that the occupying tenant was in administration, failure to obtain loss-of-rent cover, and failure adequately to explain that accidental-damage cover was excluded. Hamsard also claimed reinstatement costs, loss of rent and fixture-and-fitting losses.

The central questions were whether AE had breached its duties, whether any breach caused recoverable loss, and the proper scope of damages.

1. The claim was dismissed. Hamsard failed to establish any breach of AE’s contractual or tortious duties, and in any event failed to establish causation.
2. The relevant broker duties included identifying the client’s needs, obtaining cover matching those needs, explaining unavailable or restricted cover, and ensuring that policy wording clearly reflected the required protection. The application of those duties depended on the facts.
3. Fusion had waived disclosure of information about companies with which the proposer or directors had been connected. The proposal form sought information about the insured and named individuals, but did not ask about companies previously owned or directed by them. The precise questions, together with the authorities on waiver, meant that no wider duty of disclosure arose.
4. AE was not in breach concerning Incanite’s administration. On the balance of probabilities, Hamsard had failed to prove that AE did not inform the underwriters that administrators occupied the premises.
5. Loss-of-rent cover was not required. There had been no rent for some time, the administrators were not to pay rent, there was no likely tenant, and Hamsard had repeatedly instructed AE that it intended to sell the premises.
6. AE adequately communicated the restricted cover. The 5 March quotation described fire-and-perils cover, the later Statement of Facts expressly stated that accidental-damage cover was not included, and Hamsard was asked to read the policy documents and raise any queries. Failure to check those documents was the client’s responsibility in the circumstances.
7. As an alternative, the court found that suitable accidental-damage cover would probably not have been available, or would have been unaffordable, and that loss-of-rent cover would have been expensive and unaffordable. Consequential rental losses would also not have been recoverable because AE had assumed no extended duties akin to those of an investment adviser.