Dunlop Haywards DHL Ltd v Barbon Insurance Group Ltd and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE FIELD,Mr Justice Field,MR JUSTICE HAMBLE,Mr Justice Hamblen |
| Judgment Date | 19 November 2009 |
| Neutral Citation | [2008] EWHC 520 (Comm),[2009] EWHC 2900 (Comm) |
| Docket Number | Case No: 2007 Folio:1059,Case No: 2007 Folio 1059 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 19 November 2009 |
[2008] EWHC 520 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
MR JUSTICE FIELD
Case No: 2007 Folio 1059
Adam Fenton QC and Julia Dias (instructed by Cayton & Co) for the Defendant/Part 20 Claimant
Nicholas Craig (instructed by Simmons & Simmons) for the Part 20 Defendant
Siobàn Healy (instructed by Kennedys) for the Excess Insurers
Hearing dates: 22 and 25 February 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
At all material times: (i) the first claimant, which was formerly known as Dunlop Heywood Lorenz Limited (“DHL”), carried on business as property consultants, including commercial property management, surveying and valuations; and (ii) the defendant/part 20 claimant (“HPC”) carried on the business of insurance broking, particularly in the fields of general commercial insurance, commercial property insurance and residential property insurance.
The first and second claimants are subsidiaries of Erinaceous Group plc (“Erinaceous Group”). By an agreement in writing dated 23 December 2005, the second claimant acquired the business of the first claimant.
For the purpose of the applications before the court, it is common ground that in December 2004 HPC was instructed by the claimants to consolidate and renew the professional indemnity insurance for all companies in the Erinaceous group except those carrying on insurance-related business and to procure a primary layer of cover of £10 million on an each and every claim basis, together with an excess layer of cover for DHL for a further £10 million. It is also common ground that HPC engaged the Part 20 defendant (“Forbes”) as sub-broker to place the cover it (HPC) had been instructed by the claimants to procure. HPC was not a Lloyd's broker, whereas Forbes was.
Forbes proceeded to place a primary layer of professional indemnity cover for the Erinaceous group and an excess layer of such cover, but the excess insurance contained a condition limiting cover to “liability arising from the Insured's Commercial Property Management activities only” (“the limiting condition”). The Excess Insurers are: Mitsui Sumitomo Insurance Underwriting at Lloyds Ltd (“Mitsui”); Württembergische Verischerung AG (“Wurtt”); WR Berkley Insurance (Europe) Ltd (“WR Berkley”); Markel International Insurance Company Ltd (“Markel”); Ace Europe Group Ltd (“Ace”); and D A Constable and others (Lloyd's syndicate 386 for the 2005 Underwriting Year) (“D A Constable”).
The claimants are facing a number of claims arising out of allegedly negligent and/or fraudulent valuations undertaken by a Mr McGarry. There is a possibility that some of these claims might impact the excess layer especially if, as the primary insurers contend, certain claims fall to be aggregated. The claimants have accordingly notified the claims to the Excess Insurers but the latter have denied liability on the ground that the claims arise out of valuations, not commercial property management activities.
In this action the claimants sue HPC for failing to fulfil their instructions by placing excess cover that was limited to liability arising from commercial property management activities only. In its Amended Defence, HPC contends that liability arising from valuations is within the excess cover because: (i) the words “Commercial Property Management” in the limiting condition is a reference to DHL, so that the excess cover is limited to the activities of DHL, including the provision of valuations; alternatively (ii) commercial property valuation activities are included in the words “commercial property management”; alternatively (iii) the excess cover policy should be rectified so that the limiting condition is restricted to the activities of DHL.
In addition to defending the claimants' claim, HPC seeks an indemnity or contribution from Forbes in Part 20 proceedings in which it alleges that any liability to the claimants arises out of breaches of contract and/or negligence on the part of Forbes by failing: (i) to draft a slip or policy wording that accurately reflected the agreement of the Excess Insurers to provide cover on the same terms as the existing cover; (ii) to carry out its instructions to procure excess cover on the same terms as the existing cover; and (iii) to appreciate the appropriateness and effect of the excess cover limiting condition and to advise HPC accordingly.
It appears that the claimants' rights of action against the Excess Insurers under the Excess policies placed by Forbes have been assigned to the Nationwide Building Society. Be that as it may, no claim, whether in these proceedings or in any other action, has so far been made against the Excess Insurers seeking an indemnity under the Excess Insurance placed by Forbes in respect of claims arising out of valuations undertaken by Mr McGarry.
The applications before the court
There are two applications before the court. First, HPC applies under CPR 19.2(2) to have the Excess Insurers joined in as defendants so that they will be bound by any decision in the action as to the true construction of the excess policy and as to whether the policy should be rectified.
CPR 19.2 (2) provides:
The court may order a person to be added as a new party if:-
(a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or
(b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.
Second, Forbes applies for summary judgement in its favour on the Part 20 claim brought against it, alternatively to have that claim struck out.
The application under CPR 19.2 (2) is resisted by the Excess Insurers on the grounds that: (i) HPC's contentions on the construction or rectification of the excess policy are not seriously arguable and accordingly it is not “desirable” that the Excess Insurers be added as parties and/or the court should exercise its discretion against joining them into the action; and (ii) in any event, HPC have no standing to join the Excess Insurers as parties since no claim is made against the Excess Insurers by any of the parties to the action.
Forbes' summary judgement and/or strike out application is based on two principal contentions: (i) even if Forbes approached the market for cover that was not in accordance with HPC's instructions, it informed HPC of the cover it proposed to place, including the limiting condition, and were instructed by HPC to procure such cover; (ii) HPC approved the wording of the slip and the Excess Policy; and (iii) HPC is accordingly: (a) in breach of a sub-broking agreement made between HPC and Forbes and dated 11 February 2005 (“the SBA”) and/or estopped from denying that it instructed Forbes to procure excess cover on the terms set out in the slip and the policy.
Events leading up to the execution of the slip and the policy
DHL was acquired by Erinaceous Group, together with other companies then owned by Hercules Group plc, in October 2004. Prior to this, Forbes had been appointed in 2004 by HPC to place professional indemnity insurance for the companies in the Erinaceous Group (other than HPC and other insurance related companies) for the year 1 April 2004 to 31 March 2005. After Erinaceous Group's acquisition of the Hercules Group, Forbes was appointed by HPC pursuant to a letter agreement dated 26 January 2005 to place the professional indemnity insurance for the enlarged Erinaceous Group (with certain exceptions) on terms, inter alia, that: (i) the cover was to be on no worse policy wording than the current Erinaceous/Hercules policy wordings unless specifically agreed by HPC in advance; (ii) return premium for the Hercules element of cover from April until July 2005 was to be secured; and (iii) Forbes' fees were to be as set out in the agreement. The decision to appoint Forbes as the placing broker was taken by Mr Nigel Davis, the Finance Director of Erinaceous Group.
The letter agreement had been preceded by an oral presentation by Forbes to HPC and a proposal entitled “Professional Indemnity Fee Proposal 2005 for Erinaceous Group plc” sent to Mr Brian Hart of HPC by Mr Andrew Bickell of Forbes on 18 January 2005 by a covering email. In that email, Mr Bickell wrote: “I would like to confirm that if we were successful in being appointed as Insurance and Risk Management advisors to the newly merged Group, we would seek to be instructed on the current Hercules placements in order to assess them thoroughly.”
The Introduction to the Fee Proposal states: “This report sets out our fee proposal for the placement and servicing of the Erinaceous/Hercules Property Services Professional Indemnity (P.I.) programme for the 12 month period from 1 April 2005. It includes all operating companies other than those specifically insured separately i.e. Hanover Park and Cadogan.” Later in this document there is reference to “you” and “your” which are references to the Erinaceous group. Thus under the heading “Remuneration – Our Fee Proposal” appear the words:
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