Insurance: Personal Responsibility For Breach Of Binding Authorities: Who Pays What?

Last year the Commercial Court held that individuals employed by

an agent under a binding authority and named on the binding

authority agreement may owe fiduciary duties personally to the

insurers who granted the authority, as their sub-agents. For more

information on the liability decision,

click here. The court has now handed down its decision on the

quantum of the insurers' claims against those individuals.

Insurers agreed binding authorities under which an agent,

through three named individuals (two directors and one employee),

was granted authority within defined financial limits to issue

bonds. They issued bonds outside the terms of delegated authority.

It was held that two of the individuals were involved in a

conspiracy to defraud insurers by issuing the bonds outside the

authorised limits and diverting premium from insurers to

themselves. As such they were in clear breach of their fiduciary

duties owed as sub-agents to the insurer. The third individual was

not found to be involved in the conspiracy to defraud and did not

directly benefit from the fraud. He was...