Are brokers the insurers of last resort?

(From Insurance Day)

Byline: Edward Coulson

A COMMON source of claims against brokers is a failure to advise claimants on their duty of disclosure, advise them on the terms of the policy, or tell them cover had for some reason not been obtained at all or was inadequate.

The claimant suffers a loss and, left with no (or no full) remedy against his or her insurer, sues the broker.

The broker's defence may be that the insurer would have rejected the claim or refused to grant cover for some reason quite unconnected with the broker's breach of duty.

The claimant may try to circumvent this defence by arguing that the broker failed to advise or warn him or her about the terms of the policy or the level of policy cover.

This article is concerned with damages in this situation and, in particular, the question of whether and in what circumstances the claimant can recover more from the broker than would have been possible from the insurer had valid cover been in place.

There is extensive case law on this subject although it is difficult to perceive any rational common thread running through it.

Further, the whole issue has been thrown into question by developments in recent years in the area of causation in professional negligence claims generally.

The case law

In Ramwade v W J Emson & Co [1987] RTR 72 it was held that damages in this situation were limited to what the claimant could have recovered from its insurers.

The defendant broker had failed, in breach of duty, to …