Duties of an Insurance Broker

October 28, 2016

The case of Dunlop Haywards (DHL) Limited v Barbon Insurance Group Limited [2009] EWHC 2900 (COMM) provides a useful summary of the duties owed by an insurance broker to his client. http://www.bailii.org/ew/cases/EWHC/Comm/2009/2900.html

These duties include a contractual duty of care and a duty of care in tort. The extent of the contractual duty is determined by the terms of the contract. It is important to note that as well as considering the express contractual terms, it is necessary to consider whether any terms may be implied by, for example, statute, a previous and consistent course of dealings or trade custom.

With regards tort, the various tests to establish whether a duty of care is owed are:

a) The three fold test established in Caparo Industries plc v Dickman and others [1990] UKHL 2

b) The incremental approach

c) The assumption of responsibility test

Assuming a duty of care is established, it is then necessary to consider what particular duties apply to insurance brokers.

As cited by Mr Justice Hamblen in Dunlop Haywards (DHL) Limited v Barbon Insurance Group Limited, it is a fundamental duty of any insurance broker to exercise reasonable care and skill in the fulfilment of its instructions and the performance of its obligations. An insurance broker is also under a duty to carefully ascertain its clients’ insurance needs and to use reasonable skill and care to obtain insurance that meets those needs, together with carefully reviewing the terms of any quotations or indications given to its clients. An insurance broker must also ensure that it explains to its client the terms of the proposed insurance to ensure the client is fully informed and satisfied that all its insurance requirements are met.

These duties are not a one off obligation when an insurance policy is first taken out but rather, continue at each renewal of the policy. Failure to comply with these duties at any stage during the commercial relationship between the insurance broker and its customer therefore amounts to a repeated and on-going breach.

This article has been produced for general information purposes and further advice should be sought from a professional advisor.

Should you have queries about the content of this article, please do not hesitate to contact Anna McClimonds, Solicitor.