Damages for insurance claim - Dalamd v Butterworth Spengler Commercial
Tuesday, October 16, 2018
This new decision of Mr Justice Butcher contains important (and cautionary) guidance for any insured with cover problems who thinks an action against the broker is the way forward.
Dalamd v Butterworth Spengler Commercial
This new decision of Mr Justice Butcher gives guidance on how the courts will value a policyholder’s loss where insurers have declined to pay a claim when the reason for insurers’ declinature arises from the broker’s negligence. It contains important (and cautionary) guidance for any insured with cover problems who thinks an action against the broker is the way forward.
The insured had a recycling plant which was badly damaged by fire. Their two insurers declined to cover and the broker was sued on various grounds, some successfully made out. And some not.
The court had to consider how to quantify damages in the scenario that would have happened if the broker’s advice about disclosure duties had not been negligent. That meant evaluating in some way the likelihood that the insured would have received money from insurers, had the broker not been negligent.
This was problematic as, for some parts of the claims, insurers had other reasons to decline, that were unrelated to the broker’s advice. The insured argued for a calculation based on a sort of chance evaluation of what the insurer might have done about other grounds for declinature and how likely it was that insurer would defend its declinature position through a trial.
The court disagreed, preferring to take a decisive view of whether the insurer would have had to pay, had the broker not been negligent. The judge pointed out that, otherwise, a claimant could actually recover more by suing his broker than he could have against his insurer, which would be a nonsense.
The lesson is that a claim against a broker, as a way of solving a coverage problem, is not a way forward if there were good reasons for the insurer declining, apart from the ones where the broker was negligent.
This publication is for general information only and is not intended to provide legal advice.