Abstract

Brokers - Duty to Advise - Expert Evidence

Article

False Claims – Committal for Contempt

In England, as against claimant who makes a false claim on an insurer, there are two forms of committal for contempt, each of which is technically distinct in law, though they may overlap. First there may be interference, or attempted interference, with the due administration of justice by issuing a claim which is known to be dishonest and deliberately manufactured. This requires to prove that: (i) the claimant deliberately set out to deceive the insurer by falsely claiming that he was injured in a genuine accident when he had conspired with others to create it; (ii) the claimant must have intended thereby to interfere with the administration of justice; (iii) the conduct must have had a tendency to interfere with the administration of justice: Airbus Operations Ltd v Roberts [2012] EWHC 3631 (Admin), and Homes for Haringey v Fari [2013] EWHC 3477 (QB).

The second form of contempt alleged in this case derives from CPR 32.14(1) which provides: "(1) Proceedings for contempt of court may be brought against a person if he makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth." In relation to this form it must be proved that: (i) the statement in question was false; (ii) the statement has, or if persisted in would be likely to have, interfered with the course of justice in some material respect; (iii) at the time it was made the maker of the statement (a) had no honest belief in the truth of the statement; and (b) knew of its likelihood to interfere with the course of justice: AXA Insurance UK plc v Rossiter [2013] EWHC 3805 (QB).

The burden of proof is on the insurer and the standard of proof is the criminal standard: Aviva Insurance Limited v Nazir [2018] EWHC 1296 (QB).

 

Brokers – Duty to Advise

 

Because a broker should take reasonable steps to ensure that the proposed policy is suitable for the client's needs, the broker (a) must advise his client of the duty to disclose all material circumstances; (b) must explain the consequences of failing to do so, though this is not an immutable or inflexible requirement; (c) must indicate the sort of matters which ought to be disclosed as being material (or at least arguably material); (d) must take reasonable care to elicit matters which ought to be disclosed but which the client might not think necessary to mention. In summary, there is a duty to take reasonable care that the client is aware of and understands its duty; to take reasonable care to elicit relevant information from him for the purposes of enabling him to comply with his duty; to take reasonable care to disclose to the insurer any material facts of which the broker is aware and not to make material representations to insurers which it knows to be untrue; to take reasonable care to obtain insurance that clearly met the client’s requirements and does not involve unnecessary risks of litigation about its legal scope and effect. A policy which is voidable for non-disclosure is not suitable.

 

If a new person becomes responsible for insurance matters in the client's organisation, the broker must ensure that he has an appropriate understanding of questions of materiality. It is important that a lay client is told of the paramount duty to disclose and what it involves, and advised to err on the side of caution so as to disclose anything that might impinge on the judgment of a competent underwriter in assessing the risk, and be helped to identify such matters. It is not sufficient simply to provide written standard form explanations and warnings annexed to proposals or policy documents. The broker must be satisfied that his client understands the position, which will usually require a specific oral or written exchange, both at the original placement and at renewal. However, the scope of the duty is limited to questions which a competent broker might have been expected to ask in the circumstances, and he will not be at fault if he had no reason to ask or if he does ask and the insured does not properlyinform him. Whether it is necessary to do so and whether the failure to do so is a breach of duty, will depend upon the circumstances, for example, if the client is well aware of the need to comply and the serious consequences of failing to do so. It will depend upon the nature of the communication and the cient’s sophistication. An omission to provide a satisfactory explanation will support a cause of action only if it is causal of the relevant non-disclosure: McNealy v Pennine Insurance [1978] 2 Lloyd's Rep 18; The Moonacre [1992] 2 Lloyd's Rep 501; Jones v Environcom Limited [2010] EWHC 759 (Comm); Synergy Health (UK) Limited v CGU Insurance Plc [2011] Lloyd's Rep IR 500; Avondale Exhibitions Ltd v Arthur J. Gallagher Insurance Brokers Ltd [2018] EWHC 1311 (QB).

Expert Evidence

Although the obligation is to exercise the reasonable skill and care of ordinarily competent insurance brokers, the profession is not be the ultimate arbiter of the standard because it is for the court to decide what standards amount to reasonable competence and those of a particular profession fall short. It is a question of law for the court: Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] 1 Ch. 384. The   court usually requires expert evidence with the necessary expertise as to the standards before it will find that conduct amounts to negligence. But there is no rule of law that expert evidence is required before a finding of professional negligence can be made. It is a matter of common sense in most cases. Such evidence is not necessary if the conduct has no rational basis or is so obviously unsupportable as not to require it. The nature of the role being performed may be more or less technical and more or less dependent on professional qualifications: Sansom v Metcalfe Hambleton and Co [1998] P.N.L.R. 542; Pantelli Associates Ltd v Corporate City Developments Number Two Ltd [2010] EWHC 3189 (TCC); Avondale Exhibitions Ltd.