EWJ 60 April 2025 web - Journal - Page 28
Broker Negligence and Loss
of Chance - Norman Hay
PLC v Marsh Ltd
The Court of Appeal (CA) recently handed down its judgment in Norman Hay PLC v Marsh
Ltd [2025] EWCA Civ 58 in which it dismissed the Defendant’s appeal concerning its
application to strike out or summarily dismiss the Claimant’s claim, reaffirming that in cases of
brokers’ negligence, the correct approach is to apply a loss of chance evaluation.
Marsh’s application was dismissed at the first instance.
The court held that in a claim against an insurer
under a conventional liability policy, the insured
would need to prove it was liable to the third party.
However, a case against an insurance broker is different. In such a case, had the broker not been negligent
and insurance had been arranged, the court then
must assess the chance that the insurer would have
paid out in any event (including on a commercial
basis), even if it was not strictly liable to do so. What the
claimant has lost is the chance to have recovered
money under a policy, even if as a matter of law, the insurer would not have needed to pay out. The court
explained that this requires a trial to establish the
factual inquiry. Marsh subsequently appealed the
decision.
The facts and strike out / summary judgment
application
Norman Hay Ltd (Norman Hay) is a holding
company whose subsidiaries were world leaders in
specialist chemicals, sealants and surface coatings.
Norman Hay alleged that its insurance broker, Marsh
Ltd (Marsh), failed to arrange suitable insurance
cover for one of its subsidiaries, Internationale Metall
IMPrägneier GmbH (IMP).
Specifically, Norman Hay alleged that Marsh was
negligent by failing to arrange worldwide (including
US) non-owned auto cover (insurance policies which
covered driving hire cars) for its group companies and
employees. As a result, Norman Hay says IMP had no
insurance cover in place when one of its employees,
Mr Kelsall, was involved in a road traffic accident in
the US whilst driving a rented car on business in 2018.
Ms Sage, the driver of the other vehicle involved, was
seriously injured and brought a claim in Ohio against
Norman Hay and IMP as being vicariously liable for
Mr Kelsall’s negligence (alongside Mr Kelsall’s estate).
Ms Sage settled her claim in 2021 for $5.5m, paid out
of an amount held in escrow in connection with Norman Hay’s sale of its subsidiaries.
Court of Appeal decision
The CA rejected Marsh’s appeal. The CA agreed that
cases against insurance brokers are different to claims
against insurers and it referred to Fraser v B.N. Furman (Productions) Ltd [1967] 1 WLR 898 (Fraser).
In Fraser, an employee of the claimant had suffered
an injury at work. The claimant then sued its insurance broker for failing to arrange suitable employer’s
liability insurance. The court held that, if the putative
insurer would have been liable in law, then damages
would be recoverable from the broker. However, if the
putative insurer would have been able to repudiate liability in law, then the court must then go on to consider whether, as a matter of business, it would have
paid out in any event notwithstanding the position on
liability. This was a question of fact, to be assessed on
loss of chance principles; the court will assess the percentage chance of a beneficial outcome occurring,
with any damages awarded adjusted to reflect that
chance (for example, a 50% chance of a putative insurer paying regardless of liability could result in 50%
of the damages being recoverable).
Norman Hay alleged that, but for Marsh’s negligence,
IMP would have had adequate insurance which
would have indemnified Norman Hay and/or IMP
from the losses arising out of the accident and it would
not have needed to pay Ms Sage under the settlement
agreement. In the alternative, Norman Hay say that
had Marsh not have been able to find suitable insurance cover, then it would have taken alternative steps,
such as telling employees that they need to arrange
their own insurance whilst in the US, or telling
them to hire private drivers which in either scenario,
insurance would have been in place.
Marsh applied to strike out Norman Hay’s claim
primarily on the basis that Norman Hay had not
pleaded that neither it nor IMP were actually liable to
Ms Sage, notwithstanding the settlement reached.
Marsh contended that this was an essential element of
causation as a liability insurance policy (if it had been
arranged) would only have responded if the insured
was liable to the third party.
EXPERT WITNESS JOURNAL
In the current case, the CA said that if there would
have been a valid claim under the putative insurance
policy then there would be no discount applied to recoverable damages. On the other hand, if it is clear
that there would be no valid claim whatsoever, then it
would not reach the requisite standard of a real and
distinct, rather than merely negligible, prospect of
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APRIL 2025
