Broker Duties

Failure to advise insureds on risk improvement requirements

Ground Gilbey Ltd v. Jardine Lloyd Thompson UK Ltd [2011]1 Commercial Court, 2 February 2011

On 9 February 2008, a serious fire occurred at Camden Market in north London, a property owned by the Claimant, GGL. The quantum of damage sustained was in the region of £6 million. The cause of the fire was a liquefied petroleum gas (LPG) portable heating appliance which had ignited clothing stock in one of the stalls. While the use of LPG heaters was prohibited under the terms of the tenancy agreement with stallholders, the practice was nevertheless widespread.

The market was insured under a policy underwritten by Fusion Insurance, acting as agents for Aviva Insurance Ltd, covering property and other associated risks. The business was broked on behalf of GGL by the Defendant, Jardine Lloyd Thompson (JLT).

When Fusion originally quoted for the risk in 2005, it undertook a pre-risk survey, which identified the presence of LPG heaters, amongst other things, as a matter of concern. JLT recommended acceptance of Fusion's quotation to their principal, and reported to them on various matters identified in the pre-risk survey. They did not, however, refer to the removal of LPG heaters nor otherwise draw their principal's attention to the requirement.

Shortly before the 2006 renewal, Fusion carried out a further, pre-renewal, survey. Again, it identified LPG heaters as an issue. Once again, JLT reported to their principals on the finding of the survey, but this time they did also make reference to the removal of "hazardous heaters and associated gas cylinders". Two months after the 2006 renewal, a further survey took place, following which Fusion notified JLT of a number of required "risk improvements". It identified LPG heaters as a "severe fire risk" and stipulated again that they had to be removed. The insurers took the view that they could not impose the requirement as a warranty, since they recognised that GGL would not have day-to-day control over the individual stallholders, but nevertheless asked JLT for confirmation that "all unacceptable heating appliances have been removed", a risk improvement that "needs to be implemented immediately". The stipulation was passed on to GGL.

The risk was surveyed once again at the time of the 2007 renewal, accompanied by a representative of JLT. It was observed that, while there was some attempt at enforcement by GGL, they were not keeping on top of the...