(Re)Insurance Weekly Update 21/11

A summary of recent developments in insurance, reinsurance and litigation law

Contents

Barnes & Anor v Black Horse Fiduciary duty arguments in a PPI mis-selling case and the status of a GISC voluntary code. Chiu v Wates An application for relief from sanctions agreed in a consent order. Wilson & Partners v Emmot A challenge to an arbitration award and the effect of defective pleading in the claim form. Langsam v Beachcroft A solicitors' negligence claim where the solicitors had specialist knowledge and sought counsel's advice, together with the interpretation of a CFA. This Week's Caselaw

Barnes & Anor v Black Horse Fiduciary duty arguments in PPI mis-selling case

http://www.bailii.org/ew/cases/EWHC/QB/2011/1416.html

The claimants bought a payment protection insurance policy from the defendant lender when it entered into a loan arrangement with the defendant. When the defendant offered the policy, it was acting on behalf of certain insurers (one of which was a member of the lender's group of companies). It was the only product which the lender had to offer. It was not pleaded that the defendant offered any advice to the claimants on the product. The claimants alleged (amongst other things) that the defendant breached its fiduciary duty.

Although lenders do not generally have any fiduciary duties to borrowers in this sort of situation, the claimants alleged that this case was exceptional for the following reasons:

One of the insurers was, at the relevant time, a member of the General Insurance Standards Council ("GISC"). It was claimed that, as the defendant acted for the insurer, it was bound by the GISC's voluntary Private Customer Code and that this gave rise to a fiduciary duty. Waksman J described this argument as "absurd": "In a context where no advice or recommendation is given I cannot see how any such assumed voluntary obligations can possibly give rise to fiduciary obligations". Furthermore, the code had not been incorporated into the PPI policy. Wording at the bottom of the second page of the terms and conditions of the policy which referred to the fact the insurer "adheres to" the code did not amount to a contractual term. The code itself also made it clear that it did not give third parties (ie policyholders) contractual rights under the Contracts (Rights of Third Parties) Act 1999. It was also claimed that the defendant was, in truth, the agent of the claimants and not the insurer. This argument was also rejected by the judge...