Brokers PI: Limitations on Scope of Broker's Duties

The Commercial Court has reaffirmed important limits on the scope of duties that brokers owe their clients.

The facts

The Defendants ran an electrical goods waste recycling facility. In 2005 and 2006, the Defendants made substantial claims under their property insurance policies as a result of two major fires. Upon the occurrence of a further major fire in September 2007, the Defendants again claimed on their property insurance. Insurers sought to avoid the policy on grounds of material non-disclosure by the Defendants of (i) their use of plasma guns (a hot works tool) in disassembling pentane fridges; (ii) the recurrent ignitions of fridge insulation that resulted from that use; and (iii) the occurrence of further fires. Insurers commenced proceedings for declaratory relief.

The Defendants joined their broker as a Third Party for failing to obtain unimpeachable insurance. Only the Defendants' claim against the broker continued to trial. The Defendants asserted that had there been proper disclosure, there was a realistic and substantial prospect of obtaining cover and that they were entitled to recover in respect of the loss of that chance (Allied Maples Group Ltd v Simmons &amp...