Discovery In Insurance – Cover Slip

Lagan Construction Group Holdings Ltd and others v Ben McArdle Ltd and Citynet Insurance Brokers

The recent case of Lagan Construction Group Holdings Ltd and others v Ben McArdle Ltd and Citynet Insurance Brokers [2017] IEHC 427 provides an insight into the court's attitude to discovery in cases involving professional indemnity insurance policies where a cover slip issue is involved.

Policy Issues

Lagan had instructed Ben McArdle Ltd (who are insurance brokers) to procure a policy of professional indemnity insurance in respect of their civil engineering business. In addition to the primary layer policy, Lagan required two layers of excess policies to be underwritten on the Lloyds market. As Ben McArdle Ltd was not licensed on the Lloyds market they used Citynet Insurance Brokers Ltd (a second insurance broker who was licensed to Lloyds) to place the excess insurance policies.

Ben McArdle Ltd placed the primary layer of cover with Royal Sun Alliance Insurance plc and instructed Citynet Insurance Brokers Ltd to renew the two layers of excess cover. Citynet Insurance Brokers Ltd renewed one layer of excess cover for the relevant period (1 October 2012 to 30 September 2013) but did not renew the second layer of excess cover with with CNA Insurance Europe Limited ("CNA") immediately.

Following from a change in broker the plaintiff sought a cover slip for the second excess layer. Citynet Insurance Brokers Ltd. placed cover with CNA on 18 April 2013. The cover was not retrospective and the policy was endorsed to that effect. In summary, therefore, there was no cover on the policy from 1 October 2012 to 18 April 2013.

When issues arose and potential claims against Lagan were notified to insurers early in 2013, this gap in the layers of insurance cover came to light.

Core Document

A serious discrepancy came to light in respect of the CNA cover slip. Lagan's solicitors wrote to Ben McArdle Ltd stating that CNA provided them with a cover slip. The slip was dated 18 April 2013 and was endorsed: -

'... CNA Insurance Europe Limited will not be liable for any claim or notification which has been notified to the primary insurer before 18 April 2013.'

A cover slip had been furnished by Ben McArdle Ltd to Lagan, but was undated and was not endorsed. Ben McArdle Ltd claimed that this cover slip was provided to them by Citynet...