Amtrust Europe Ltd v MD Insurance Services Ltd

Hearing dates: 4–5 June 2025

Charles Hollander KC:

The applications before me are as follows:

i) An application by the Claimant to amend its Particulars of Claim

ii) An application by the Claimant to add the Proposed Third Defendant to the Claim

iii) An application by the Second Defendant for summary judgment or to strike out the Claimant's claim.

The Binder

These proceedings concern the Claimant insurer AmTrust's claims for inadequate underwriting and claims handling in respect of property insurance schemes. The First Defendant MDIS was appointed by AmTrust (who was acting as underwriter) to act as coverholder on its behalf to manage the underwriting process and claims handling in respect of various latent defect insurance policies including the Premier Guarantee and LABC Warranty schemes (“the Policies”).

MDIS established and administered the schemes pursuant to which the Policies were issued. Each scheme comprised a suite of documents including policy wordings, Rules of Registration, various types of certificate and cover notes as well as Underwriting Guidelines, Technical Manuals, Policies and Operating Procedures (“the Scheme Documents”). The Scheme Documents were produced and periodically updated by MDIS.

MDIS had the right to market the scheme products and was defined as the Scheme Administrator within the Scheme Documents.

MDIS approached AmTrust to fulfil the role of Underwriter of the products as defined in the Scheme Documents. AmTrust did so by way of a Binding Authority Agreement (the “Binder”) pursuant to which MDIS was authorised to bind the insurance products on its behalf in accordance with the terms of the Binder.

The scheme was aimed at developers of new properties. MDIS engaged its in-house surveying subsidiary companies MDWIS (the Second Defendant) and MDWSS (the proposed Third Defendant) to survey properties for which the developer sought a Policy. MDWIS and MDWSS were subsidiaries of MDIS and shared some common directors with MDIS.

Only properties certified as ‘standard risk’ or ‘normal risk’ could be the subject of a Policy. The insurance enabled developers to sell their developments with the benefit of defects liability insurance. Such a Policy was often a requirement of any sale or mortgage of a newly constructed property.

Once a Policy was issued in respect of a property, pursuant to the terms of the Policies (1) the developer of a new property development was to be liable for any defects within the initial years following completion (referred to as the Defects Insurance Period and (2) thereafter, AmTrust was to be on cover in respect of the further Structural Insurance Period for the remaining policy years.

The Binder was entered into on 17 December 2010 between MDIS as the Coverholder, and AmTrust as Underwriter. The terms of the Binder governed MDIS' role as coverholder in respect of the insurance schemes in respect of both underwriting and claims handling.

The Binder was effective from 1 February 2011 until 29 February 2020.

The Proceedings

The Claim Form was issued against MDIS on 27 April 2023. It was amended prior to being served to add MDWIS as Second Defendant on 17 August 2023. The Amended Claim Form was served shortly thereafter on 25 August 2023. The Particulars of Claim and Confidential Appendices were served on 11 October 2023.

AmTrust claims against MDIS for negligence and breach of a duty of care in contract and tort. It claims against MDWIS for breach of a duty of care and seeks to add MDWSS to make similar claims.

The proceedings were stayed to allow the parties to carry out the pre-action process, in the course of which MDIS and MDWIS raised concerns about AmTrust's pleaded case. AmTrust has now applied to amend its Particulars of Claim. This raises potential limitation issues.

Duty of care

The logical starting point is to consider the application for summary judgment and strike out by MDWIS. If MDWIS are correct that no relevant duty of care exists, that informs the other applications.

The test for summary judgment is well known and set out by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15] and approved by the Court of Appeal in AC Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098 Rep. I.R. 301 at [24].

Duty of care: the factual position

The binding authority granted by AmTrust to MDIS is expressed in general terms. It refers to MDIS as the Coverholder and provides by Section 4 that the Underwriters authorise the Coverholder to:

4.1.1 bind insurances and amendments thereto for the Underwriters' account

4.1.2 act as the Underwriters' agent in accordance with Section 33 for the purpose of receiving premiums from insured and settling refunds and to receive claims money prior to onward transmission to insureds

Section 4 then sets out the duties of the Coverholder.

There is no other contractual document before the court which binds AmTrust directly. As a result, there is a measure of uncertainty at this stage as to what may be regarded as the contractual chain. What happened was that MDIS presented documentation to developers and instructed MDWIS/MDWSS to carry out surveys on properties where the developer desired to take advantage of the defects liability insurance which MDIS was offering through AmTrust. Although reference has been made to the Scheme Documents, these were not documents which bound AmTrust (other than the binder and policy wordings) but those which came into existence to enable MDIS to effect defects liability insurance for developers under the binder.

MDIS refer to UK Insurance Ltd v Carillion Specialist Services Ltd [2019] PNLR 30 where Alexander Nissen KC said about this kind of insurance at [6]:

“Unsurprisingly, the [insurer] would not wish to have issued such policies unless it had first been satisfied that the works in respect of which cover was issued were, during the course of their execution, regularly inspected and monitored by an independent surveyor so that, upon their completion, a surveyor acting with reasonable skill and care would be able to say that, as far as (s)he was concerned, the works had apparently been undertaken competently. In reliance on such confirmation, provided by means of a Certificate of Approval, a policy would then be issued to the insured on the standard terms… the [insurer] was relying on an expectation that reasonable skill and care had been exercised. The effect of this was, ordinarily, that the [insurer] anticipated that it may have to indemnify an insured in respect of a latent defect which had not been identified during the construction period by a surveyor using reasonable skill and care.”

Central to the Scheme Documents was the Rules of Registration. This is an agreement between MDIS, described as the Scheme Administrator, and the developer. Thus, for example, Premier Guarantee New Homes version 4 Rules Clause 2.6.1 set out the conditions which needed to be fulfilled by the developer in order to obtain insurance through MDIS and underwritten by AmTrust. The key provision for present purpose was Clause 3:

“3.0 THE TECHNICAL AUDIT

3.1 THE ROLE OF THE SITE AUDIT SURVEYOR

The Site Audit Surveyor is employed by the Underwriter to assess the quality of each Housing Unit in order to determine whether it represents a standard risk to the Underwriter. To achieve this they will check whether each Housing Unit has been constructed in accordance with the then current technical requirements contained in the Technical Manual issued to each Developer by the Scheme Administrator. The checks will not be exhaustive and the Site Audit Surveyor will be carrying out random checks on each Housing Unit. For the avoidance of doubt the Site Audit Surveyor will have no liability to any party other than the Underwriter in the event of defects being discovered during the Defects Insurance Period or Structural Insurance Period and it is the responsibility of the Developer to ensure that each Housing Unit is constructed using good industry practice and materials. The Site Audit Surveyor will also be continuously monitoring the standard of construction for each New Development.

3.2 CHECKS CARRIED OUT BY THE SITE AUDIT SURVEYOR Where appropriate the Site Audit Surveyor will carry out the following checks on each Housing Unit: i) a plan check; ii) a check of calculations; iii) a review of the historical records for the site; iv) a check on the site investigation procedures and reports; v) a review of any remediation measures and subsequent verification procedures; vi) visits to site to check standards of construction; vii) checks on materials or components used in the construction; viii) checks that relevant guarantees and warranties required from third parties are received; ix) checks on the standard of construction. These reviews and checks should not be relied upon by the Developer to confirm that the construction and design and materials of the Housing Unit complies with Building Regulations and all relevant legislation applicable at the time each New Development is started. The Developer...